Facebook
Fark
Digg
Reddit
Stumble
Monday, Jan. 25, 2010 | 9:19 p.m.
Related Document
Sun Archives
- Fertittas seek to block creditors’ lawsuit in Station bankruptcy case (1-12-2010)
- Company might manage 4 Station Casinos properties (1-6-2010)
- Station Casinos bondholders want permission to sue (12-29-2009)
- AG says any Station Casinos trustee must be licensed by gaming regulators (12-3-2009)
- Station Casinos, lenders agree to rent decrease at 4 properties (11-20-2009)
- Creditors want to expand probe of Station Casinos deal (11-19-2009)
- Station Casinos’ loss widens on reorganization costs (11-16-2009)
- Station Casinos wants more time to restructure finances (10-16-2009)
- Judge grants request of Station Casinos creditors to probe 2007 deal (9-30-2009)
- Station Casinos opposes creditors’ request to probe 2007 deal (9-29-2009)
RENO – After six hours of arguments, a federal bankruptcy judge advised Station Casinos and unsecured creditors to hold negotiations over a $2.3 billion debt, rather than face legal action.
U.S. Bankruptcy Judge Greg Zive withheld a ruling on the petition by the unsecured creditors to be allowed to sue over the arrangement of the 2007 leveraged-buyout deal that took the casino company private.
Susheel Kirpalani, attorney for the creditors, told the judge the creditors “were left holding the bag” while “insiders and fat cats” got big payouts in the $8.9 billion buyout by Colony Capital and the Fertitta family.
“The unsecured creditors were harmed by the transaction,” Kirpalani argued. He called it a fraudulent transfer.
But Thomas Kreller, attorney for Station, said a suit would result in “acrimonious litigation” and would disrupt the chances of coming up with a plan for the company's reorganization.
He said denial of the unsecured creditors' right to sue wouldn't extinguish the money owed. But permitting a suit, Kreller said, would result in “significant and irreparable harm” to Station.
Scott Kane, attorney for the Special Litigation Committee of the Station board of directors, said it looked into claims and determined that the $8.9 million was not an excessive price to pay for the company at the time. There was nothing at that time to suggest the company would fail, he said.
The creditors claim it was too much and it saddled with company with an additional $1.7 billion in debt. But others suggest it was the downturn in the economy that crippled the company.
Zive said he didn't see any evidence of fraud in the buyout by Colony and the Fertitta family in taking the company private.
Zive advised Station Casinos to allow the unsecured creditors to be a “meaningful participant” in the talks toward reorganization. He said he believed there would be “unintended consequences” if he permitted a suit go forward at this time.
“I find people negotiate when people have a little bit of risk,” in advising the two sides to talk, Zive said. “The creditors deserve to be heard.”
If there are no negotiations, Zive said “I’m willing to rule. It may not be in the best business interest but it will be on the law.”
Kreller said Station “has reached out” to the creditors and “we have not been ignoring them.”
But Kirpalani said the purchase resulted in $196 million to the Fertittas and “other insiders.” The buyout was structured, he said, to “hinder or delay unsecured creditors from being paid.”
Kirpalani compared the money owed to a gambling debt and said Nevada has a law that makes it a criminal offense not to pay a gambling debt.” But Judge Zive said this was not a gambling debt.
There were more than 40 attorneys in the courtroom and there were 20 people on the telephone to monitor the hearing.
Arguments on a second issue in the bankruptcy case were delayed to allow the parties to continue talks. A hearing on that issue will be Jan. 28.
The issue involved Station's willingness to pay the legal fees of a certain group of creditors in exchange for that group dropping its request for an examiner. Two parties oppose the request.
Zive said he needed more details and he “didn’t have any idea of the fees” to be paid to lawyers in this arrangement. He told the parties “to see if you can work it out.”
Pardon me, I'm not a lawyer, but it would look like the unsecured creditors are over a barrel. 40 attorneys in one courtroom?
The comments by the Judge seem to indicate they'll get a dime on a dollar, while the attorneys will get their usual percentage. As they say:
"What's the difference between a good lawyer and a bad lawyer?
A bad lawyer can let a case drag out for several years.
A good lawyer can make it last even longer".
Ned: Actually, in big Ch. 11 cases like this it's not unusual to have a planeload's worth of lawyers in the room. The amazing thing is that usually, the Court only wants to hear from two of them--the atty for the debtor and the attorney for the creditor's committee. Needless to say, that doesn't stop everyone from showing up just to say "Joe Blow, on behalf of creditor X". :)
he purchase resulted in $196 million to the Fertittas and "other insiders." The buyout was structured, he said, to "hinder or delay unsecured creditors from being paid."
The Fertittas are little better than classic Las Vegas gangsters, and are lucky that the unsecured creditors are not an opposing "family" or else "other" methods may have been "employed" for collecting their money instead of courtroom litigation. It was a sleazy transaction no matter how many people will say they had no idea the economy was going to tank blah blah blah!!!
Why would anyone lend that kind of money (apparently $2.3 billion in total) without security? Or even with security unless the security was 150% of the money lent? They rolled the dice and got burned here.
Isn't it amazing that this has been dragging on for so long? The Fertitas and CO have ruined what was once a great Casino . The lawyers are nothing more than vultures and the bankruptcy judge not to far behind! Let them go bankrupt and let the free market take over.
Hmmm. I wish a judge would tell my lender to negotiate with me regarding my home loan. I'm happy to stay, but why should I? Many others are just bailing on their contract to pay? Since all of these people are bailing on their commitments, my value continues to go down. What's the incentive to stay?
LVMD2020, and the Fertittas have the audacity of wanting to retain ownership after wiping out the mortgages.
I am not saying that what the Fertittas did was right.....but it was genius. They paid themselves out on borrowed money that had no backing. You can't blame them. How many of you have or had an unsecured line of credit from your bank? I guarantee at least 90-99% of you do.
Around 1.1 million bankruptcies were filed in 2009. It's a similar situation for the Fertitta's and for a personal bankruptcy.....only on a much larger scale. If I had no morals, I could have easily done the same thing. My house is upside down, but I can still make the payments, so I choose to do that rather than file BK.
I know many people who aren't though and filing BK.
S711
Sinatra711, your operative phrase was 'If I had no morals.' What the Fertittas did affected thousands of jobs at their properties and compromised the standard of living for their employees. Many have lost their jobs and many more have seen wage and benefit cuts that have greatly impacted their lives. You said it all in that the Fertittas made a brilliant move but their gredd came at a great cost to others. I hope they rot in hell for thier greed.
"Scott Kane, attorney for the Special Litigation Committee of the Station board of directors, said it looked into claims and determined that the $8.9 million was not an excessive price to pay for the company at the time."
That should read $8.9 billion...