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April 19, 2015

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Boyd drops out of Station Casino auction

CEO says Station insiders have advantage in bid process

Station Casinos properties

The clock tower of the Boulder Station hotel-casino obscures the resort's 15-story tower. Boulder Station has won three Launch slideshow »

Boyd Gaming has abandoned efforts to acquire Station Casinos assets that will be auctioned next week.

In a release issued today, Boyd Gaming President and CEO Keith Smith said it would be pointless for his company to pursue any of the 11 Station properties because Station insiders would have an advantage in the bid process.

“Over the last 18 months, we have devoted significant resources in our attempt to acquire the OpCo assets of Station Casinos,” Smith said. “Unfortunately, given bidding procedures that favor Station insiders and our current view of the limited potential value of the operating and development assets, we have concluded this opportunity no longer makes sense for our company.”

The OpCo assets include the Santa Fe and Texas Station properties and two Fiesta-branded casinos.

In a settlement agreement disclosed in a U.S. Bankruptcy Court filing earlier this week, Station indicated it had come to terms with bondholders owed $2.8 billion who have been fighting Station’s reorganization plans.

Under terms of the agreement, bondholders agreed to invest up to $100 million for a stake of up to 15 percent in a company that will control five Station “PropCo” properties.

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

Those properties would be managed by Fertitta Gaming LLC and would be owned by Fertitta Gaming, Station co-owner Colony Capital LLC, the bondholder investors and banks holding the mortgage debt against the properties.

The new Fertitta-led company would be a stalking-horse bidder for the OpCo properties.

Boyd Gaming’s Smith said provisions in the bidding process make it difficult for qualified bidders to complete on a level playing field.

Smith said the process includes:

* A put option that would force an outside buyer to acquire the currently leased land under Texas Station for $75 million, a requirement that would not apply to Station insiders.

* Provisions which allow Station to transfer certain crucial assets from the OpCo assets prior to their sale, including customer lists and IT infrastructure, without adequate compensation.

* Station’s right to hire away any or all employees and executives of the OpCo assets prior to their sale, regardless of their strategic role, at Station's sole discretion.

“Boyd Gaming remains committed to growth, however, we will only pursue transactions that are financially sound, fit well with our existing business and offer attractive long-term returns for our shareholders,” Smith said in the release. “Clearly, this opportunity no longer meets these criteria.”

Two more properties — Green Valley Ranch and Aliante Station — aren’t part of the bankruptcy or the auction and Station said in court papers that efforts continue to restructure their debt. The Greenspun family, owner of the Las Vegas Sun, is Station’s partner in those properties.

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