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May 19, 2019

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Lenders battling in Station Casinos bankruptcy case

Top lenders seek to protect their positions in Chapter 11 case

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The entrance of Sunset Station as the sun goes down in Henderson.

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The bankruptcy of Station Casinos Inc. has revealed that the Las Vegas company's banks are fighting amongst themselves as different groups of lenders move to protect their positions in the company's $6.4 billion of debt.

In advance of a hearing today in Reno on Station's initial plans to use cash during the bankruptcy process, a group of 12 lenders filed an objection.

They are Bank of Hawaii, Bank of Nevada, BNP Paribas, First Tennessee Bank, General Electric Capital Corp., Genesis CLO, Natixis, Castlerigg Master Investments Ltd., Trust Company of the West, the Bank of Nova Scotia, Union Bank and U.S. Bank. Those banks say they hold nearly 30 percent of Station's senior secured debt.

The banks, called the "Independent Lenders,'' charge that for more than six months they have tried to engage Station, Deutsche Bank as administrative agent and a lenders' "Steering Committee'' regarding potential restructuring plans for Station.

"The Independent Lenders have been rebuffed in all respects and have been excluded from any meaningful participation in the development of a mutually acceptable proposed capital structure,'' those lenders charged in court papers today.

They complained that while Deutsche Bank and its advisers claimed to be acting in behalf of all secured lenders in the restructuring talks, Deutsche Bank and the debtors repeatedly rebuffed the Independent Lenders' request for due diligence and other basic information.

The Independent Lenders say Deutsche Bank has interests in three credit facilities at issue in the bankruptcy and that its interests conflict with those of the Independent Lenders.

"Throughout this entire process, Deutsche Bank improperly has used its position as the Administrative Agent to block other lenders and to engage in suspect negotiations and schemes, in order to manipulate the capital restructuring to its advantage and to the disadvantage of other senior lenders,'' the Independent Lenders charged in a court filing presented by their attorneys with the Chicago law firm of Paul, Hastings, Janofsky & Walker; and the Reno law firm of Downey Brand.

Station and Deutsche Bank have not yet responded to the Independent Lenders' filing. A Station spokeswoman had no immediate comment.

The Independent Lenders complain specifically that:

--Station proposes to transfer tens of millions of dollars to non-debtor affiliates, including to an entity to pay interest on property loans.

--Proposed budget items are "grossly inappropriate and unexplained'' including more than $31 million for professional fees over 13 weeks, $30 million for "Native Gaming Deals'' and $22 million in capital expenditures over 13 weeks.

--Station and Deutsche Bank have "engaged in suspect negotiations and transactions that warrant close scrutiny.'' These include an offer by Deutsche Bank to select lenders to make a one-time payment to them in exchange for support of a reorganization plan that the independents say heavily favored Deutsche Bank and other key property lenders. They also include a $257 million draw by Station on a credit facility on Dec. 19, 2008. The lenders say Deutsche Bank didn't object to this draw and that Station drew the money on the eve of defaulting on a lending covenant; and that Station knew about the impending default and didn't disclose it.

"The court should call for a full vetting and justification of the debtors' various early-case, extraordinary requests for relief -- a process simply not possible on the schedule sought by the debtors,'' the Independent Lenders concluded.

Station and certain affiliates filed for Chapter 11 bankruptcy protection Tuesday after months of talks with lenders didn't produce an agreement on a plan for restructuring its debt.

Because of the recession, Station's revenue and cash flow have fallen and it has had difficulty making its debt payments.

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