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Saturday, Sept. 26, 2009 | 3:33 p.m.
Related Document (.pdf)
Sun Archives
- Study: Move to take Station Casinos private was fair (9-23-2009)
- Winners begin to emerge in fight for Station assets (9-11-2009)
- Lenders want study on Station's rejection of Boyd, other issues (9-2-2009)
- Judge delays key part in Station bankruptcy case (9-1-2009)
- Creditors probe deal that took Station private (8-27-2009)
- Station’s legal battle heats up in bankruptcy case (8-24-2009)
- Station Casinos swings to loss in second quarter (8-14-2009)
- Boyd still interested in acquiring Station properties (8-5-2009)
- Culinary Union sees shot in Station insolvency (8-3-2009)
- Lenders battling in Station Casinos bankruptcy case (7-30-2009)
- Station Casinos wants out of lease for office space (7-29-2009)
- Station Casinos files for Chapter 11 (7-28-2009)
- Bondholder drops lawsuit against Station Casinos (5-11-2009)
- Station Casinos: Bankruptcy date depends on bondholders (3-18-2009)
- Betting it all on bankruptcy? (2-17-2009)
- Hearing delayed again on Station Casinos site (2-16-2009)
- Boyd responds to Station’s rejection of buyout (3-9-2009)
- Station rejects Boyd’s offer, extends debt deadline (3-3-2009)
- Boyd makes play for Station Properties (2-24-2009)
- Boyd Gaming offers to buy Station (2-23-2009)
- Station responds to lawsuit, misses $15.5M payment (2-17-2009)
Station Casinos Inc. of Las Vegas is fighting a motion that an examiner be appointed to investigate its financial operations.
The company on Friday filed a response in U.S. Bankruptcy Court to a motion by a group of minority lenders that an examiner with wide-ranging investigatory authority be appointed.
The minority lenders early this month charged creditors are being harmed by what they called conflicts of interest in the Station corporate structure; payments the company makes to itself to lease four hotel-casinos; and the company's alleged failure to seriously entertain an offer by Boyd Gaming Corp. to buy certain Station assets.
Station, in its response, denied the conflict of interest allegations, said it's studying potential changes to the lease arrangement for the four casinos and offered details on why it rejected Boyd's offer.
The request for appointment of an examiner is likely to be discussed during a court hearing Wednesday, but court records show the minority lenders and Station are in disputes over discovery issues. That means the ruling on the motion for appointment of an examiner may be delayed until the discovery controversies are resolved.
Also likely to be discussed Wednesday is a report filed last week by the Special Litigation Committee of Station's board of directors. The committee and its experts studied the 2007 deal in which members of Station's founding Fertitta family and investment company Colony Capital of Los Angeles took the company private.
The committee found the transaction was not successful as the parties could not have anticipated the deep recession that has left Station unable to meet its debt obligations.
With $6.49 billion of debt and other liabilities and facing declining revenue as the recession eroded the locals gaming market -- Station revenue was down 21 percent year-to-year in the second quarter -- the company filed for bankruptcy protection July 28. Its hotel-casinos remain open.
The litigation committee said the terms of the going-private deal were fair at the time and that those terms would likely survive threatened legal challenges.
Another topic during Wednesday's hearing is Station's latest plan to spend cash during the bankruptcy process.
On the motion for appointment of an examiner, attorneys for Station said in Friday's filing that the complaining lenders:
--Appear to hold less than 30 percent of the debt in a $900 million loan agreement.
--Are fighting with other lenders that, as a majority, have approved Station's post-bankruptcy spending plans -- plans objected to by the minority lenders.
--Are critical of "the very capital structure into which they themselves chose to invest in."
Under that structure, Station executives oversee various corporate entities that are subject to three separate loan agreements with competing interests, the lenders complained.
Station, however, said its management decisions are already scrutinized by the court and aren't hurting certain creditors to benefit others.
"The motion simply reveals that the minority lenders are embroiled in intercreditor disputes, not the victims of any conflicts of interest allegedly residing with the debtors," Station said in its filing.
The lease at issue involves some $250 million Station pays annually to lease Red Rock Resort, Sunset Station, Boulder Station and Palace Station. Much of the rental money is earmarked toward payments on $2.475 billion in debt encumbering the hotel-casinos. The lenders have complained the rental and mortgage payments are excessive, particularly given the downturn in the economy that has reduced the value of the properties. They want the deal re-worked so more money is available to other creditors.
But Station said Friday: "The debtors and their advisors have devoted, and continue to devote, significant effort and resources to arriving at an appropriate restructuring of the master lease."
Station said a valuation and market rent study of the properties is under way along with a legal review of potential lease-rejection damage claims.
"Everything that the minority lenders want the examiner to do – review and analysis of all options with respect to the master lease, review and analysis of how the debtors are deploying cash collateral, review and analysis of the amount and propriety of professional fee payments – is already being done by the debtors in the exercise of their fiduciary duties and under the watchful eyes of this court, the ... lender groups, the Official Committee of Unsecured Creditors and all of the other interested parties in these cases, including the minority lenders themselves. An examiner would simply not add any value to this already highly-scrutinized situation," the company said in its filing.
The minority lenders have also complained Station hurt creditors by failing to seriously entertain the sale of some properties to Boyd Gaming Corp. of Las Vegas, which could have generated cash to cover some creditors' claims.
But Station, in its filing Friday, said "Due consideration was given to Boyd and will be given to any other bona fide offers."
Station said that prior to Boyd's formal "indication of interest" on Feb. 23 of this year, a Station executive had met informally with Boyd management at Boyd's request "at which time the Boyd representatives expressed their general interest in acquiring one or two of the debtors' properties on a consensual basis."
The company said Boyd's offer was rejected after evaluations that included discussions with legal and financial advisors as well as certain creditors.
Station also noted its belief that before and after the Boyd offer, "Boyd communicated directly with a number of (Station) creditors about its interest in acquiring certain assets."
Such contact could have caused problems for Station with the creditors, since Station at the time was trying to gain lenders' consent for debt concessions that were needed under a plan for a pre-packaged bankruptcy filing that would have included commitments of additional capital from the Fertittas and Colony.
That pre-packaged plan did not happen as creditors couldn't agree among themselves on concessions, and Station filed for a regular Chapter 11 reorganization.
Station said its "OpCo" operating company "continues to believe that a comprehensive debt-restructuring plan is in the best interest of the debtors' estate, rather than pursuit of a distressed-sale transaction under the present circumstances with a primary competitor such as Boyd."
"Thus, far from ignoring its duty to explore a potential transaction with Boyd, OpCo did what it was supposed to do as a publicly reporting company: it carefully assessed Boyd’s non-binding, non-specific, highly conditional expression of interest, responded appropriately and filed its response with the Securities Exchange Commission (on) March 3."
The minority lenders seeking the examination of Station, calling themselves the Independent Lenders to Station Casinos, include Bank of Hawaii, BNB Paribas, First Tennessee Bank, General Electric Capital Corp., Genesis CLO, Natixis, Castlerigg Master Investments Ltd., the Bank of Nova Scotia, Union Bank and U.S. Bank.
Also objecting to their motion for appointment of an examiner is the Official Committee of Unsecured Creditors, which said it's already investigating many of the minority lenders' complaints as well as the 2007, $5.7 billion going-private buyout deal.
"There is no justification for the breadth and scope of the relief sought by the independent lenders. Not only is it expensive and burdensome to the debtors and their estates, but it is also completely duplicative of matters within the mandate of the committee," the committee's filing said.
"The committee does not dispute the necessity of having a fiduciary of these (bankruptcy) estates pursue each and every one of the matters referenced in the examiner motion," the creditors said.
The creditors committee said the independent lenders' effort for appointment of an examiner appears to relate to dissatisfaction with Deutsche Bank, a key Station lender and administrator of multiple credit agreements.
"To the extent that the independent lenders have sought relief at issue here to bolster their negotiating position with Deutsche Bank or the debtors or both, the examiner motion has been brought for an improper purpose," the creditors said.
Steve Green, on the job, even on Saturday.
My bet, the judge tells the group asking for the appointment of an Examiner that they can have one, if they pay for the Examiner's fees themselves.
As demonstrated by the comments earlier this week, by someone called Belinda and claiming an affinity for the unsecured creditors who are the owners of bonds issued by Station Casinos, Inc. before the leveraged buy out, and not paid with the proceeds of the leveraged buy out, those unsecured bond holders are the creditors who should be pursuing the appointment of an Examiner, because it is their claims that the Station Casinos Litigation Committee report danced around, with only a page or so of discussion in the massive report.
I'm not saying those people have a claim which can succeed in taking away the collateral of Station's secured creditors, but the fact that the report did not do a rigorous analysis of whether those people were harmed is curious.
I used to be a President member at Station Casinos. I started to game at Barley's thinking I would retain my status and found that they didn't count that even though they owned it.
Stations also changed the way they let you keep your level for one year . They lost the locals because of poor marketing and nothing more. I could have done a better job marketing since I nearly lived at one of their casinos.
Terrible system.
The problem with Stations like other Casinos were they are to GREEDY. The recession had something to do with this but didn't Stations expand (Alliante , RED ROCK) when there was no need to . What about this City Center? We don't need another Casino for at least 20 years! City Center will compete against themselves. Now Stations is paying a fortune to the Accountants and lawyers instead of servicing their customers.
I agree with the greed, bad marketing, & bad players system; but you have to admit that privatization a year before was in the best interest in the company. If it didn't do so, the company would of been taken apart and sold like items at a yard sale.
Stations could have and should have foreseen a downturn in revenues and occupancy. Why? Because hotel rooms were being built faster than the airport could grow. This was certain to cause lower occupancy for several years. Imagine if Echelon had also been built. Even without a recession the casinos were in for a rough several years. Stations could have easily predicted this by a few numbers on the back of a napkin.
I'd like to hear more about Station selling some of the land that they are now upside down on. They have a lot of property surrounding Panorama Towers, the Castaway Site, the Durango Station site, etc.
If you don't sell land to get out of bankruptcy, when do you?
I hope BOYD buys it all!
So do I.
So do I. :)
Open letter to Boyd Caming Corp:
Dear Mr Boyd
To all the CEO's, executives, CFO's and marketing stategists and analysts
We (the enthusiastics of old style Las Vegas), may this be the citicen of the city of Las Vegas, or the regular visitors of this greatest city that has ever been built by mankind on earth, we would like...
to get the Stardust back.
We understand, that you pulled this property down with the intention to build something bigger and greater. Nobody knew about the consequences of this financial crisis, but this is the time for some action. There is no chance to rebuild the Stardust as it was, but there is a chance to get something similar: Buy out on the FountainBleu, rename that place and call it "The New Stardust".
We have strong confidence that with smart negotiations, you will be able to get that halfway finished property at a good price. With some additional funds needed for completion, she (The New Stardust) will be the perfect casino for you. You will have your place on Las Vegas Boulevard, plus, you will have options wide open on the Echelon site...
I am a frequent reader of this website, and a regular visitor of Las Vegas, Nevada. I live in Switzerland, but the fact that the Stardust was one of the greatest hotels Vegas has ever seen, this has been in the news over here so many times. We believe in Boyd Gaming, and with some optimism and some efforts, You can make it happen.
Sincerely
Boris Radtke, Switzerland