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August 20, 2019

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Station Casinos wants more time to restructure finances

Company asks judge for four-month extension in Reno court filing

Station Casinos properties

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Station Casinos Inc. of Las Vegas has asked its bankruptcy judge for more time to exclusively propose a plan to reorganize its finances -- not a simple task given the recession and the competing demands of creditors.

In a motion filed Friday in U.S. Bankruptcy Court in Reno, Station asked Bankruptcy Judge Gregg Zive to extend by four months the period in which Station can exclusively file a reorganization plan. The current deadline is Nov. 25.

Such extensions are common in big corporate bankruptcies.

"The Chapter 11 Cases are extremely large and complex, perhaps among the largest Chapter 11 cases ever filed in the District of Nevada. The filings were precipitated by a severe economic recession that continues unabated," Station said in its request. "The debtors’ businesses have been and continue to be negatively impacted by the continuing recession. The financial performance of many of the debtors’ key business units have yet to stabilize, making valuation of the debtors’ businesses and assessment of their future prospects – and therefore the formulation of a plan of reorganization – extraordinarily challenging."

"Compounding those challenges are the intercreditor tensions inherent in the debtors' complex capital structure," the company said.

A key issue in the bankruptcy case is the 2007 going-private deal in which the Las Vegas locals gaming leader was taken over by affiliates of investment firm Colony Capital of Los Angeles and members of the founding Fertitta family.

The going-private deal involved some $3.375 billion of secured debt. The company now has some $6.49 billion of debt and other obligations -- debt the company had trouble servicing after the recession reduced revenue at its properties.

Certain creditors are complaining about a provision in the deal in which Station now leases four properties from itself, with the rental payments assigned to cover mortgage costs. The objecting creditors say this arrangement should be re-worked to leave more cash available for all creditors.

Deutsche Bank and the other holders of the mortgage notes at issue have been subjected to criticism by other lenders because of the lease deal.

"In the face of this intercreditor jockeying, the debtors may be the only parties in a position to advance a plan of reorganization that properly balances the interests of all of the estates and their respective stakeholders," Station said in its filing.

In its filing Friday, Station said it's studying potential changes to that lease arrangement, called the Master Lease.

"Resolution of the Master Lease undoubtedly will be a critical component of Station Casinos Inc.'s plan of reorganization. Coming to a resolution of the Master Lease that satisfies the requirements of all of Station Casinos Inc.’s stakeholders will require careful and patient negotiation that will materially impact all other facets of the restructured Station Casinos Inc.," the company's filing said.

The lease at issue involves some $250 million Station pays annually to lease Red Rock Resort, Sunset Station, Boulder Station and Palace Station. Much of the rental money is earmarked toward payments on $2.475 billion in debt encumbering the hotel-casinos.

A hearing on Station's motion to extend the reorganization plan filing deadline is set for Nov. 20, the same day Zive is scheduled to rule on a request by certain lenders that an examiner by appointed to study Station's finances -- a request opposed by Station.

Zive has already granted a request by the case's Official Committee of Unsecured Creditors to hire a law firm to investigate the 2007 going-private transaction and how it affects creditors today.

Station has 18 casino properties in the Las Vegas area and manages a big casino in the Sacramento area. It filed for bankruptcy protection July 28.

For the second quarter, the recession hurt Station as revenue fell 21 percent year to year, from $339.1 million to $267.2 million. Station reported a second-quarter loss of $65.3 million vs. a profit in the year-earlier quarter of $18.6 million.

In filings last week, the company reported the book value of assets involved in the bankruptcy was $4.756 billion as of the end of the July vs. liabilities of $5.596 billion.

In filings with the Securities and Exchange Commission, the company last reported total assets of $5.725 billion vs. liabilities of $6.49 billion.

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