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October 21, 2014

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Station Casinos bondholders: Stop loans to Green Valley Ranch manager

Map of Green Valley Ranch

Green Valley Ranch

2300 Paseo Verde Parkway, Henderson

Bondholders in Station Casinos Inc.'s bankruptcy case are demanding that Station stop making loans to the Station subsidiary that operates the 496-room Green Valley Ranch Resort in Henderson.

“Station Casinos Inc.’s interests in GV Ranch Station Inc. (the subsidiary) are speculative and risky,” the Official Committee of Unsecured Creditors said in a court filing Monday in Station’s main bankruptcy case.

(While Station Casinos Inc. and its Green Valley Ranch management company are in bankruptcy, the Green Valley Ranch hotel-casino itself is not).

Saying GV Ranch Station Inc. filed for bankruptcy protection Feb. 10 because of a dispute with its partner and threats that lenders may try to foreclose on the resort, the bondholders complained Monday that Green Valley Ranch Resort stopped paying management fees to Station’s subsidiary in September.

Station’s subsidiary is supposed to receive a management fee of 2 percent of the property’s revenue and about 5 percent of its earnings before interest, taxes, depreciation and amortization. However, the recession has harmed the resort like others in the Las Vegas area and Station has said Green Valley Ranch likely will default soon on more than $750 million in secured debt.

The committee said Station isn’t in the business of lending money and that even if it was, the bankruptcy of its subsidiary relieved Station of any responsibility to lend money to the subsidiary.

“Station Casinos Inc.’s continued provision of financing to GV Ranch is a decision to throw good money after bad and well outside of the ordinary course of business,” the bondholders said in their court motion, which is to be heard during an April 26 hearing. “If Station Casinos continues to lend to GV Ranch, it will deplete funds from the debtors’ estates that would otherwise go to Station Casinos’ creditors.”

On Feb. 19, attorneys for GV Ranch Station Inc. said the subsidiary has received several loans from Station Casinos since the parent company filed for reorganization in July.

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 February 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."

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.

Station’s partner in Green Valley Ranch Resort is an affiliate of the Greenspun family, owner of the Las Vegas Sun.

On Feb. 18, that affiliate, GCR Gaming LLC asked that the GV Ranch bankruptcy case be dismissed so GCR could pursue claims that Station has mismanaged the resort. Station has denied those allegations and said they came from a disgruntled fired manager.

The bondholders in the main Station Casinos bankruptcy case, in the meantime, have not yet filed their response to Station’s plan of reorganization in which five Station properties would remain under control of their lenders and Station owners the Fertitta family and Colony Capital.

The five properties are Red Rock Resort, Palace Station, Boulder Station, Sunset Station and the Wild Wild West.

Under that plan unveiled last week, interests in 13 more gaming properties – including Green Valley Ranch – would be sold along with key parcels of undeveloped land.

Both the unsecured bondholders, owed $2.3 billion, and Station’s secured creditors will likely take steep losses if the reorganization plan is approved.

Those losses reflect the reduced value of the company’s properties because of the recession.

Secured lenders owed $2.475 billion for four major properties – Red Rock, Boulder Station, Palace Station and Sunset Station – would swap their loans for a 50 percent stake in those properties and a new mortgage of $1.6 billion.