Station Casinos, lenders agree to extend deadline

By Liz Benston

Tuesday, April 14, 2009 | 5:59 p.m.

Station Casinos and its lenders have agreed to extend by 30 days a voting deadline on a proposed bankruptcy reorganization plan that would leave the current owners, including the Fertitta family and investment partner Colony Capital, at the company's helm, a company spokeswoman said today.

The May 15 deadline gives holders of $2.3 billion in bonds more time to consider Station Casinos' offer to buy back investors' bonds and exchange them with new, discounted notes with extended maturity dates, potentially reducing the company's debt by $1.7 billion.

The extension postpones a Chapter 11 bankruptcy filing by Station, which anticipates filing for bankruptcy protection regardless of whether bondholders approve the exchange. If bondholders approve the deal, the company would undergo a prepackaged bankruptcy reorganization, an expedited process that lenders agree on beforehand. If bondholders reject the offer, Station may be forced into a traditional bankruptcy, which could involve transferring certain properties to lenders or the auction of casinos to interested buyers.

Station Casinos proposed a reorganization plan in February that included an offer to exchange outstanding bonds for new notes and cash worth 10 cents to 50 cents on the dollar. The owners agreed to contribute up to $244 million in cash as equity if bondholders agree to the deal. By mutual agreement, the parties previously agreed to extend a March 2 voting deadline to April 10.

Along with the extension of the voting period, the company's lenders also agreed to extend a forbearance agreement to May 15 that prevents bank lenders and bondholders from demanding immediate repayment of debts. That agreement would have expired April 15.

The extension allows more time for negotiations with lenders over the restructuring plan, Station Casinos spokeswoman Lori Nelson said. Nelson declined further comment on the extension.

Station Casinos racked up $5.8 billion in debt after going private in 2007, when real estate values were booming.

Last month, Station Casinos rejected an offer by competitor Boyd Gaming to acquire a majority of the company's casinos for $950 million. The offer, analysts said, was superior to that offered to senior unsecured bondholders, who are typically paid after bank lenders in the bankruptcy process.

Some analysts say Station bondholders haven't agreed to the deal yet because they are not being compensated enough in exchange for accepting reduced-value bonds. The analysts say Station should offer bondholders some equity in the company so they can participate in more upside once the economy rebounds.

Station Casinos is one of many companies attempting to reduce debt by capitalizing on a decline in bond prices.