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Thursday, April 29, 2010 | 9:30 a.m.
Related Documents (.pdf)
Related Documents (.pdf)
Sun Archives
- Station Casinos: Boyd Gaming meddling in bankruptcy case (4-28-2010)
- Boyd Gaming objects to Station Casinos reorganization plan (4-22-2010)
- Union-backed group critical of Station reorganization plan (4-21-2010)
- Creditors attack Station Casinos bankruptcy plan (4-21-2010)
- Key lenders agree to Station Casinos reorganization plan (4-19-2010)
- Station Casinos asks judge for extension in bankruptcy case (4-8-2010)
- Station Casinos reports revenue drop in fourth quarter (3-31-2010)
- Station Casinos reorganization plan: Sell several properties (2-25-2010)
- Station Casinos reaches deal with key lenders, hopes to emerge from bankruptcy (2-25-2010)
- Bankruptcy judge urges Station Casinos, creditors to negotiate (1-25-2010)
- Fertittas seek to block creditors’ lawsuit in Station bankruptcy case (1-12-2010)
- Station Casinos bondholders want permission to sue (12-29-2009)
- Culinary Union sides with Station Casino’s creditors (11-23-2009)
- Culinary Union statement critical of Station Casinos (11-19-2009)
- Creditors want to expand probe of Station Casinos deal (11-19-2009)
Attorneys for Station Casinos Inc. of Las Vegas and its key lenders are defending the company's bankruptcy reorganization plan, saying a group of five hotel-casinos won't be at a competitive advantage to 13 more properties should the other 13 be picked up by another buyer.
Under Station's plan, Station executives Frank and Lorenzo Fertitta and Station co-owner Colony Capital of Los Angeles would have an ownership stake in and would manage Station's five "PropCo" properties: Red Rock Resort in Summerlin, Sunset Station in Henderson and Boulder Station, Palace Station and the Wild Wild West in Las Vegas.
Thirteen more properties such as the two Fiestas, Texas Station and Santa Fe Station would be auctioned by the bankruptcy court with the proceeds paying some of the claims of creditors. The Fertittas, Colony and the PropCo lenders plan to bid for Station's interest in the 13 OpCo properties as the "stalking horse" bidder.
Bondholders and other unsecured creditors, independent bank lenders and competitor Boyd Gaming Corp. have been attacking the Station plan as favoring the insiders and are likely to continue doing so during bankruptcy court hearings in Reno May 4 and 5. Billions of dollars are at stake in the case as the Fertitta/Colony proposals value the company at about $2.572 billion, while its debts and liabilities were last reported at $6.6 billion.
In a filing Monday, the bondholders asked Judge Gregg Zive to allow competing plans of reorganization to be filed so that creditors can recover more money than what is proposed by the Fertittas, Colony Capital and key lenders Deutsche Bank and JPMorgan Chase Bank.
"The debtors have been given several chances to put forth a good faith plan that benefits all creditors to whom they owe a fiduciary duty. The debtors have not used those opportunities to make progress through substantive negotiations with the vast majority of Station Casinos' creditors. Rather, they have offered sham auctions, one sided 'compromises' and conclusory, opaque rationales for their proposed actions," the bondholders' attorneys argued.
For instance, they charged: "Station Casinos has agreed to give the Fertitta brothers the opportunity to buy all remaining Station Casinos assets for a set price that all third-party bidders are required to top despite the fact that third-party bidders cannot buy the assets that are being stripped away from Station Casinos and handed to reorganized PropCo."
But should the Fertittas, Colony Capital, Deutsche Bank and JPMorgan Chase be unsuccessful in acquiring the 13 "OpCo" casinos, several of which have hotels, the successful OpCo buyer would not be at a disadvantage in competing with the PropCo properties, Station attorneys said in a court filing Wednesday.
Creditors opposed to the plan say it's been designed to strip away valuable information technology and intellectual property assets and give them to PropCo, leaving OpCo unable to successfully compete.
That's not the case since the PropCo properties don't compete with the OpCo properties, Station said in its filing.
"Station Casinos' management has strategically placed each casino so that each Station Casinos-managed casino has its own local geographic market," Station's filing said. "In view of their geographical and market separation, it is specious to argue that PropCo, once it acquires assets necessary to be able to continue operating, will somehow cannibalize the other Station Casinos-managed casinos. Moreover, the revised agreement does not provide for PropCo to acquire competitive information regarding the Station Casinos-managed casinos."
Station's attorneys and attorneys for PropCo lenders Deutsche Bank and JPMorgan Chase argued the deal has numerous protections for OpCo's operations including payment to OpCo of $35 million for certain assets to be transferred to PropCo, assumption of $13 million in OpCo liabilities, OpCo's retention of branding features for websites, PropCo's receipt of customer lists only for those customers whose primary casino play is at a PropCo casino, a plan that OpCo receive an appropriate information technology system and an agreement that corporate employees be reasonably allocated between the two companies.
"OpCo will not be pillaged by PropCo in the event the amicable divorce comes to pass: PropCo cannot raid OpCo of its senior management, and OpCo will have operational IT systems. The agreement neither unfairly discriminates against OpCo nor unjustly enriches PropCo as if PropCo were a direct competitor of OpCo," the Station filing said.
While the unsecured creditors including bondholders owed $2.5 billion and a group of independent lenders believed to hold less than 20 percent of the OpCo bank debt have objected to the plan, Station noted its reorganization plan is supported by holders of most of its secured debt.
"The creditors who stand to gain or lose the most over any shifts in value between PropCo and OpCo not only support the approval of the revised agreement, but were, in fact, active participants in the negotiation of the revised agreement," Station said in its filing.
Attorneys for two of the key secured lenders, Deutsche Bank and JPMorgan Chase, also filed papers Wednesday supporting the reorganization plan.
"The amended compromise strikes a critical balance to ensure that OpCo and PropCo will each remain fully operational post-emergence (from bankruptcy), even if they do not remain commonly owned," the bank attorneys said in their filing.
While some creditors have charged the reorganization plan is part of a scheme by the Fertittas to retain control of all of Station at the lowest possible price, the PropCo lenders called that argument "fanciful."
Deutsche Bank and JPMorgan -- known in the cases as the CMBS (commercial mortgage-backed securities) lenders -- are the driving force behind the plan, their attorneys said. That's because they hold the $2.475 billion mortgage to four of Station's most valuable properties: Red Rock and Sunset, Boulder and Palace stations.
"The CMBS lenders are the principal stakeholders of PropCo and will, at the end of the day, own the PropCo casinos, whether through the (reorganization) plan or otherwise. The CMBS lenders will require an operator to run their casinos and have selected Fertitta Gaming because they believe Fertitta Gaming will do the best job managing these properties post-(bankruptcy) emergence. It is that simple," the bank attorneys said. "The CMBS lenders also insisted that Fertitta Gaming purchase a stake in the entity which will ultimately own the PropCo casinos post-emergence so that Fertitta Gaming’s economic interests will be aligned with the CMBS lenders’ interests as owners.
"For the very same reasons, the CMBS lenders have insisted that Fertitta Gaming invest alongside the CMBS lenders in offering to acquire the OpCo assets through the stalking horse bid," the attorneys said.
Also, attorneys for Deutsche Bank, the agent for OpCo lenders owed $900 million, said in court papers the bank discussed the sale of the OpCo assets with Boyd Gaming and other potential "strategic buyers" and that the Fertitta/Colony offer initially came in at $635 million, but was later raised to $772 million including $317 million in cash.
The attorneys for Deutsche Bank said the Steering Committee of OpCo lenders holding more than 60 percent of the OpCo debt selected the Fertitta/Colony offer as the "highest and best" stalking horse bid for OpCo.
Station filed for Chapter 11 reorganization last summer after the recession reduced spending at its properties and it was unable to meet debt obligations.
The Fertittas, Colony Capital and key lenders Deutsche Bank and JPMorgan Chase Bank are SMOOTH OPERATORS.
I LOVE capitalism!!!
All the other Vegas casinos should get together, buy all the older Stations and implode them to reduce competition.
"Station Casinos: No competitive advantage under bankruptcy plan"....Ha Ha Ha! They must be joking. Smooth operators is right! Smooth out the debtors and keep everything for a fraction of the price.
American_Gaming_Guru understands my prior comment.
In America you pay for what you don't know.
These guys get a free pass because they know a lot.
Funny if an auction takes place all competitors have an option of paying more than the Fertittas. All the talk, it's time to put up or shut up. Great article though.
The whole thing smells of a group of rats to me..
Where is the information about the partnership with this newspaper? I thought Greenspun was part of this bankruptcy action? Most articles about something as important as this company is to employees and tax revenue should always explain how this papers corporate interest intermingle with those of Stations? I guess, like the Democratic Party, they just like leaving their conflicts of interest out of the public eye.
Stations must be paying a fortune in hiring an army of attorneys who are leaving no stone unturned in nurturing the Station Casinos Scam to fruition.
The BK Judge has probably already been bought and sold. So you know the brats (Fertitta) will get their way.
I see the usual Fertitta-bashers are out in full force; Let's see, we have..."scam", "brats", "conflicts of interest", "group of rats", "put up or shut up", "free pass", "smooth operators...keep everything for a fraction..." and my favorite of the day, "implode"!
Oh wait, I think someone's missing and unaccounted for! Where the hell is "The Fertittas should be in jail"?! Damn it, I thought we had them all! Good thing there's still plenty of time for someone to post THAT brilliant insight. After all, it's apparently appropriate to reccomend incarceration for those who CREATED TENS OF THOUSANDS OF JOBS, then fought like hell to KEEP THEIR COMPANY GOING THROUGH THE WORST ECONOMIC CONDITIONS IN OUR INDUSTRY'S HISTORY, right guys?
loyal_employee :
Apparently you disagree?
Don't cha just love it?
For any of you who have tried to file for chapter 7 bankruptcy under the new law will find that you will not get the same treatment as many business owners will. In fact, if you have ANY income, you will be forced to file chapter 13, which will not only destroy your credit, but leave you with NO cash to live on. If you have NO income, they will not let you reaffirm your mortgage, so you lose your house and they will not discharge your debt. Nice of them, uh?
We need to demand that they repeal the 2005 bankruptcy laws for us common folk! We are the ones who need it most.....
To suggest OpCo and PropCo properties don't compete is laughable. Sunset doesn't compete with Green Valley? Santa Fe doesn't compete with Red Rock? Texas doesn't compete with Boulder? There are hundreds of thousands of residents who live equidistant between all these pairs of casinos.
The new Fertitta Gaming is somehow managing to swindle their way into retaining what they once had while being absolved of a crazy amount of debt.
Where I get confused is why the OpCo properties are being sold in bulk fashion? Wouldn't it be prudent for Greg Zive to consider a piece mail fire sail that would potentially garner a better return for the bond and note holders?
There are few that would be interested in topping Fertitta Gaming's stalking horse bid for the kit and kaboodle. However, I would think that there would be many potential suitors for individual properties which might end up garnering more money on the whole for the distressed investors.
I hope like hell the Union comes in and ruins Stations. The upper management has no loyalty to the rank and file who get down in the trenches and do what it takes to make the casino run on a daily basis.
Part 1 of 2:
Stations Casinos, Inc.'s management has had the support and cooperation of Bankruptcy Court Judge Greg Zive from the first day these bankruptcies were filed.
Sometimes Judge Zive has been required by the bankruptcy case law and statutes to rule in their favor, and other times Judge Zive "has exercised his discretion" in Station Casinos, Inc.'s managements favor and against the desire of the unsecured creditors, unsecured bond holders, junior secured creditors, and the dissident secured creditors. Judge Zive seems to have the view that Stations Casinos, Inc.'s current management "will ultimately win the war", so I have not seen him allow the "out of luck" creditors get anything they have asked for, even rights which other bankruptcy court judges around the country think are fairly standard rights for creditors in a bankruptcy, required by legal precedent.
So, the bottom line is that because of strong law in favor of Stations Casinos, Inc.'s current management (the Fertittas and Colony Capital) and the key secured lenders Deutsche Bank and JPMorgan Chase Bank are going to get what they want in the motions described in the article above.
The "good" casinos and "good prospects for the future" raw land are not for sale to anyone except JPMorgan Chase Bank and Deutsche Bank, unless the buyer wants to pay those lenders 100 cents on the dollar on the PropCo mortgage loans. As a secondary deal, after thsoe two lenders exercise their right to "take their collateral" under the Section 363 motion and Chapter 11 Plan, the lenders are free to make a buy-in/management deal with whomever they want, and put that buyer's cash in Deutsche's and JP Morgan Chase's pocket. Those two banks have chosen the Fertittas and Colony Capital as their new managers and co-owners, and there's nothing the other creditors can do about it. Unless Boyd comes in with a huge boat load of cash, far greater than the Ferittas and Colony Capital can afford to pay, Boyd cannot buy Red Rock, Palace, Boulder, Sunset, the land and lease of the Wild West, and the two other valuable casino site in "PropCo". Even then, if Deutsche and JP Morgan Chase don't like the Boyd people, Boyd is out of luck because those two senior mortgage lenders get to call the shots.
The chances of anyone other than this group of The Fertittas, Colony Capital, Deutsche Bank and JPMorgan Chase Bank becoming owners of the "good" PropCo casinos are about as great as seeing an iceberg floating in Lake Mead in June.
As to the "garbage casinos" and the partnership interests in the two ventures with the Greenspuns, commonly called the "OpCo Properties", Deutsche Bank is a gain in the driver's seat as senior mortgage lender. In order to sell the OpCo garbage properties, Deutsche Bank has to take a haircut economically. They've accepted the $772 Million bid, unless someone like Boyd comes in with all cash.
Part 2 of 2:
According to the bankruptcy files, apparently Deutsche and JP Morgan Chase negotiated with Boyd, and Boyd tried to get the two banks to abandon the Ferittas as co-owners and managers of both the PropCo and OpCo properties, but Boyd would not bid enough, or for some other reason the two banks didn't want to do a deal with Boyd.
So again, I am expecting things to turn out peachy keen for the Fertittas, Colony Capital, Deutche Bank and JP Morgan Chase during the hearings on 5/4 and 5/5. It's not even worth buying a plane ticket to Reno to watch the court room action.
And as a p.s. to the judge and the Fertittas, my young adult daughter and son ask you to please get this bankruptcy case over as quickly as possible, so that OpCo can stop spending millions and millions of dollars each month, for bankruptcy attorneys fees. My adult children used to like to go to the Palace Station Buffet for lunch. They were there yesterday, and said that the quality of food has gotten so bad it is worse than the cafeteria food at Clark County's High Schools.
Improving the food at the OpCo casinos will be essential for preserving jobs and preserving value of these "garbage" OpCo casinos. Wise financial advice from Stations customers which should be taken immediately!
Hey Neiman1, I answered your questions the other night. Do you not understand, or are your questions some sort of silly rhetoric of a person who dislikes the Greenspuns. Frankly I don't know them, and don't agree with Brian Greenspun very often, but reality is clear with respect to their family's partnerships in Green Valley Station and Aliante Station. Here's what I said in answer to your same question the other day:
: @neiman1
The two partnerships which own Green Valley Ranch and Aliante are not in bankruptcy. The Greenspun entities which are the 1/2 partner in each deal are not in bankruptcy.
The Stations Casino entity which is the 1/2 partner in Green Valley Ranch is in bankruptcy. That same bankrupt entity is the manager of Green Valley Ranch. So that partnership interest and management contract are part of the "OpCo" assets being auctioned off.
The Colony/Fertitta entity which is the 1/2 partner in and manager of Aliante Station, is not in bankruptcy, but that partnership interest and management contract also are part of the "OpCo" assets being auctioned off.
If the judge is careful, all vendors to the actual entities which own Green Valley Ranch and Aliante Station should not get stiffed out of any money owed them as a result of this auction and related Chapter 11 Plan. So, in answer to you question, the Greenspuns do not "profit" from this whole Stations Casinos, Inc. mess. Instead they have the potential of being forced to be partners with some company they do not like (such as the Fertitta managed Deutsche Bank/Fertitta stalking horse bidder).
The big losers are people and companies who are unsecured creditors of the bankrupt entities. They will get nothing, regardless of whether Boyd, Deutsche/Fertitta or some third part is the successful bidder.
All of the "sale proceeds" (purchase price cash) from both the OpCo and the PropCo sales will go to the first lien secured lenders (aka mortgage lenders) on the real property and personal property (e.g. kitchen and restaurant equipment) of the wholly owned casinos. Those "first lien lenders" are, in all cases, groups led by Deutsche Bank and its affiliates."
AND NEIMAN1, BY THE WAY, THE SUN'S REPORTERS CANNOT ANSWER YOUR QUESTIONS ON THE TWO CASINOS BECAUSE THIS NEWSPAPER'S OWNERS ARE IN SERIOUS LITIGATION WITH THE FERTITTAS AND THEY "CANNOT COMMENT" EVEN THROUGH A REPORTER, BECAUSE BRIAN GREENSPUN IS THE EDITOR OF THIS NEWSPAPER. PEOPLE MAKE "NO COMMENT" WHEN THEY WISELY FOLLOW THEIR LAWYERS ADVICE. WHY SHOULD THE GREENSPUNS BE ANY DIFFERENT THAN THE FERTITTAS?
YOU DON'T SEE THE TWO FERITTTA BROTHERS ANSWERING QUESTIONS ABOUT THIS CASE POSED BY THE LVRJ DO YOU?
red rock, sunset, boulder , palace and wild wild west, so that's the 5 cacsinos the Fertittas like to control themselves and the other casinos might be for sale, is that it? Who wants to make a bid for a new but deserted Aliante Station casino if it's not for grabs? Santa Fe, Texas and the Fiestas, ok, but the price has to be right. I am still positive that Boyd Gaming will ge a piece of the cake. And the hefty jump of the stocks might be an indicator that something's going on in this regard...
I don't think Boyd will purchase anything. They have a hard time managing some of their Coast Casinos (SUNCOAST, Orleans and Freemont to name a few) All the properties will remain in Stations hands. If the price is right I can see Penn purchasing the Fiestas.
Southpoint Number 1 ! This place knows what people want. But they should bring back the 100 per cent machines.....