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November 28, 2014

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Green Valley Ranch manager asks that loans from Station Casinos continue

Map of Green Valley Ranch

Green Valley Ranch

2300 Paseo Verde Parkway, Henderson

Station Casinos Inc.'s subsidiary that runs Green Valley Ranch hotel-casino is seeking Bankruptcy Court approval to continue borrowing money from Station Casinos — and is resisting efforts to have the subsidiary's bankruptcy case dismissed.

GV Ranch Station Inc., the Station subsidiary that invested in Green Valley Ranch in partnership with affiliates of the Greenspun family, filed for Chapter 11 reorganization on Feb. 10. Its parent, Station Casinos, filed for reorganization last July.

In Feb. 19 court papers, attorneys for GV Ranch Station Inc. said the subsidiary has received several loans from Station Casinos since the parent company filed for reorganization. GV Ranch Station said the advances have been in the form of "manager advances" for working capital and general corporate purposes; and for equity investments in the Henderson resort as required by the partnership agreement.

"GV Ranch must be allowed to continue receiving loans from Station Casinos without delay in order to avoid disrupting operations at Green Valley Ranch Resort Spa & Casino," GV Ranch Station attorneys said in the court filing. "In the absence of approval, GV Ranch will be impeded in its ability to preserve the going concern value of the subject property, to the detriment of the GV Ranch estate and creditors and, ultimately, to the detriment of the Station debtors’ estates and creditors."

GV Ranch Station said that in Station's main bankruptcy case, Station has already received permission to make "drop down loans" to subsidiaries and that, in the case of Green Valley Ranch, through Jan. 31 it had loaned the GV Ranch subsidiary $6.3 million. Of that amount, $5.95 million was for cash equity contributions and $379,000 was for manager advances.

GV Ranch Station attorneys also are asking that the GV Ranch case be jointly administered with the main Station Casinos' case.

Station's partner in the resort is Greenspun family affiliate GCR Gaming LLC. The Greenspun family also owns the Las Vegas Sun.

GCR Gaming on Feb. 18 filed a motion asking the court to dismiss the GV Ranch bankruptcy case so that GCR Gaming could pursue its claim that GV Ranch has mismanaged the resort. GCR Gaming is seeking to have GV Ranch replaced as operating partner of the resort, charging GV Ranch harmed the resort by sabotaging Green Valley Ranch marketing efforts and diverting business to some of Station's wholly-owned casinos such as Red Rock Resort in Summerlin.

Station Casinos on Feb. 18 denied the allegations, and GV Ranch on Friday filed court papers further disputing the allegations.

"Station Casinos ... will demonstrate, at the appropriate time, that a review of the operating performance of Green Valley Ranch and certain of the other Station Casinos properties (including Red Rock) over the past several years provides no evidence of Station Casinos or the debtor (GV Ranch Station) causing the intentional migration of business away from Green Valley Ranch to other Station Casinos properties," the GV Ranch filing said. "The only migration of business that occurred was the ordinary and customary migration that takes place as players move among properties located in the same general market, including the migration of table-games players from other Station Casinos properties to Green Valley Ranch."

"Green Valley Ranch and Aliante Station (jointly owned by Station and a Greenspun affiliate) benefited significantly from the migration of customers and business from other Station Casinos properties upon the opening of each property," GV Ranch said in its filing.

GV Ranch said the GCR allegations are based on claims made by "disgruntled former General Manager Timothy Wright" and asserted Wright engaged in "several documented and recorded instances of improper conduct" while managing the property.

GV Ranch said the financial performance of the property was poor during his tenure and improved after he left. It said Wright tried to "extort Station Casinos" by going public with false allegations about the movement of high-rollers from Green Valley Ranch to Red Rock unless he was paid an extra $162,500 in severance after he was terminated.

Wright and GCR Gaming have not yet responded to these assertions.

GV Ranch, in the meantime, said the resort is encumbered by liens securing debt in excess of $750 million and that secured debt is likely to be in default soon.

"The secured lenders to Green Valley Ranch are significantly undersecured, and a restructuring of Green Valley Ranch is both necessary and imminent," GV Ranch said in its filing, adding some of the lien holders have been in talks with Station and GCR Gaming about a restructuring.

Complicating the issue, GV Ranch revealed that besides its secured debt, Station Casinos' pre-bankruptcy lenders assert a claim of more than $900 million against the resort "as a purported guarantor of Station Casinos' (pre-bankruptcy) bank debt." Lenders also are questioning a 2006 transaction in which the partnership made a distribution of about $285 million to both GV Ranch and GCR Gaming, GV Ranch's filing said.

While GCR Gaming claims GV Ranch filed for bankruptcy in bad faith to block GCR Gaming's attempt to replace GV Ranch as the manager, GV Ranch said in Friday's filing that the Chapter 11 filing was "entirely valid" because of the need for an overall resort restructuring, threats that lenders may foreclose on the resort and because of GCR Gaming's threatened litigation to remove GV Ranch as manager of the property.

"Unfortunately for (GCR Gaming), the economic reality surrounding Green Valley Ranch likely means that (GCR Gaming's) equity interests in Green Valley Ranch are wiped out" with potentially "serious negative tax consequences for (GCR Gaming's) principals as well," GV Ranch said in its filing.

These factors, GV Ranch said, call into question GCR Gaming's motion to have the case dismissed "and in making the unsubstantiated and reckless accusations contained therein."

GCR Gaming has not yet responded to Friday's filing.

GV Ranch's motion to continue borrowing money from Station Casinos, and the motion by GCR Gaming that the GV Ranch case be dismissed, are set to be heard during an April 19 hearing before Bankruptcy Judge Gregg Zive in Reno.