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Wednesday, Jan. 6, 2010 | 4:50 p.m.
Beyond the Sun
St. Louis-based Isle of Capri Casinos Inc. on Wednesday confirmed reports by Debtwire that Isle has agreed to manage four Station Casinos Inc. properties should they be spun out of Station’s bankruptcy case.
Isle entered into a “consultancy agreement” with certain lenders to “assist the lenders to be prepared to take over the assets to the extent necessary," company spokeswoman Jill Haynes said.
The agreement would enable Isle of Capri to operate the properties for the lenders, led by Deutsche Bank, should Station fail to maintain control of them in bankruptcy court.
Isle of Capri is already in the process of being licensed in Nevada because of a deal for a casino in Northern Nevada unrelated to the Station Casinos situation.
Isle has 13 gaming operations in the United States in Black Hawk, Colo.; Lake Charles, La.; Lula, Biloxi and Natchez, Miss.; Kansas City, Caruthersville and Boonville, Mo.; Bettendorf, Davenport, Waterloo and Marquette, Iowa; and Pompano Beach, Fla.
The four Station properties are encumbered by $2.475 billion in debt and are leased by Station from itself, with the lease payments of $249.5 million annually covering the mortgage payment.
Other creditors have attacked the lease arrangement, charging the rent is excessive.
Holders of the $2.475 billion in mortgage debt, in compromising last month to allow a temporary reduction in the rent, indicated their willingness to take over ownership of the four hotel-casinos in order to preserve their interests as lenders.
But bondholders owed $2.3 billion and other unsecured creditors are asking the bankruptcy court to cancel the deal spinning off the four hotel-casinos into a Station subsidiary called PropCo.
They want the debt associated with those casinos and the lease canceled so that the revenue produced by the four PropCo properties is available to all creditors – and so that those four casinos are classified as assets that can be used to satisfy all of the creditors in the case.
Bankruptcy Judge Gregg Zive has set a Jan. 25 hearing on the request by the creditors that they be allowed to sue Station and its bank lenders to cancel the PropCo arrangement and to assert fraudulent transfer claims related to the $8.8 billion 2007 leveraged buyout deal that took Station private.
Yet another factor in the bankruptcy case that could prevent Isle of Capri Casinos from managing the four PropCo properties is an offer by Boyd Gaming Corp. to buy all of Station, with its 18 gaming properties in Southern Nevada and an Indian casino in the Sacramento area, for $2.45 billion.
While Station has resisted efforts that it be acquired by Boyd, creditors in the bankruptcy process will have additional opportunities to press for a Station sale to raise cash to cover some of their debts.
Station had no comment Wednesday on Isle of Capri’s deal to manage the four properties. Station has until March 25 to exclusively propose a plan of reorganization.