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Boyd Moves to Stop Station’s Reorganization

Posted on April 23rd, 2010

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Courts are expected to get some filings in relation to reorganization plans of Station Casinos, owned by Fertitta Gaming. Boyd Gaming Corp, which plans to purchase Station Casinos is at the forefront of objecting to this plan. It also happens to be a creditor on the Chapter 11 bankruptcy process for Station Casino by purchasing a portion of the debt owed by Fertitta Gaming.

Claims by Boyd Gaming

In a nutshell, Boyd feels that Station Casinos’ bankruptcy reorganization is unfair by diminishing the value of properties making it unappealing to potential bidders. There had been two plans sent during the last month giving undue favor to the casino owners Fertitta family and the lenders. The plans allows for them to cherry pick assets leaving bidders little to no chance of fair pricing for its 13 casinos as well as gaming contracts. The company asked for Reno’s Bankruptcy Court to carefully review the plans instead of rushing through to approve the proposals. This would give creditors who are not in favor of the plans to brainstorm on viable alternative that will not disparage their chance for a fair deal.

Another plan provides for spin-off of five large resorts to a holding company owned by Station Casino lenders which includes Sunset Station and Red Rock Resort. The plan to spin off their largest casinos will essentially strip the casinos of customer databases, operating tools and club membership. Without these, the value of these properties will most certainly hit rock bottom. This is advantageous to Colony Capital, a Los Angeles-based real estate company and Fertitta Gaming owned by the Fertitta family.

For the remaining assets such as Fiesta properties, Santa Fe Station and Texas Station, these would be sold via auction by a bankruptcy court. The Fertitta family made it known that they would be pursuing their bid for those properties with a $770 million stalking-horse. Unsecured creditors of Station Casino are backing up Boyd Gaming’s claims to slow down the process. They agree that these reorganization plans will allow Fertitta Gaming to continue controlling the enterprise by allowing them to get away with low valuation that their plans would eventually create.

Station Casino Responds

Lori Nelson, spokeswoman for Station Casinos are preparing its own assertions in response to the objections filed by Boyd Gaming Corp through court filings. They quickly maintain that the objections are all wrong and responsive papers that are to come will demonstrate such. It can be recalled that Boyd made public offers twice for the Fertitta-controlled Station Casinos. On February last year, the offer was made for 14 casinos amounting to $950 million. Again, on December, the bid increased to $2.45 billion, this time for the whole company but both times, the offers were turned back.

Boyd raised issues to that Station Casinos appear to be making no effort towards debt reorganization but they continue to remain keen on acquiring a part or the entire company. Station Casino plans to set up five of its biggest resorts as its own company which JP Morgan Chase and Deutsche Bank would acquire. They will then sell 46% of the stake for $85.6 million to Fertitta Gaming.

The properties covered by its spinoff are Wild Wild West, Red Rock Resort, Boulder Station, Sunset Station and Palace Station. Under a long term contract, Fertitta Gaming would be expected to operate these casinos which would pay them 2% of the revenues generated and 5% of cash flow. The bid with the stalking horse will see Colony Capital and banks as partners. This would call for over $315 million cash and about $455 million in credit but they did not elaborate on the amount the parties are set to commit.