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May 24, 2022

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New objections filed in Station Casinos bankruptcy case

Platoons of attorneys in the Station Casinos Inc. bankruptcy case have more work to do as new objections are being filed in the Las Vegas company's complex bankruptcy case.

As the Bankruptcy Court in Reno prepares for an Aug. 6 auction of certain Station properties, attorneys for Station and its creditors are also preparing for hearings July 15-16 on whether the court should approve the disclosure statement for Station's reorganization plan.

The disclosure statement, as approved or modified, is an important document in the case as it spells out how the company will emerge from bankruptcy and how much money creditors will be paid.

Station owners the Fertitta family of Las Vegas and Los Angeles investment house Colony Capital and their preferred lenders have advanced a two-step reorganization in which five Las Vegas-area properties would be spun off into a "PropCo" company and would be controlled by lenders, the Fertittas and Colony. These hotel-casino properties are Red Rock Resort, the Wild Wild West, Sunset Station, Boulder Station and Palace Station.

Eleven more "OpCo" properties would be auctioned off, with the Fertitta-Colony-lender group hoping to maintain control of them as the $772 million stalking horse bidder. These casinos include Santa Fe Station, Texas Station and the two Fiestas.

Two more properties -- Green Valley Ranch and Aliante Station -- are not part of the auction. Station's partner in these hotel-casinos is the Greenspun family, owner of the Las Vegas Sun. The partners are working to restructure their debt outside of the bankruptcy process.

While the Fertittas have said their plan is the best way to move the company forward past the recession, bondholders and minority lenders stand to lose billions of dollars if the plan is approved and some are vigorously contesting it.

The case's Committee of Unsecured Creditors representing bondholders owed $2.5 billion is appealing in U.S. District Court the ruling by Bankruptcy Judge Gregg Zive approving the auction procedures. The bondholders charge the bidding plan is rigged to favor the Fertittas.

So far, the bondholders have made little progress with their claim that Station's 2007 going-private transaction by the Fertittas and Colony Capital harmed the bondholders by overwhelming the company with debt and pushing it into bankruptcy. That deal valued the company at $8.5 billion.

It was the recession, not the going-private deal, that caused the bankruptcy, Station attorneys say.

The Committee of Unsecured Creditors has not yet filed its objection to the reorganization disclosure statement, but court records indicate it intends to do so by July 7.

Two other groups, however, filed objections Thursday.

Independent lenders owed $244 million complained, among other things, that under the plan, Station insiders and others have arranged releases for themselves -- without adequate explanation -- so they can't be sued by the bankruptcy estate for actions that may have caused the bankruptcy.

Like the bondholders, the independent lenders have complained their loans are at risk because of the going-private deal and other actions including Station's repeated refusal to entertain a buyout offer from competitor Boyd Gaming Corp. of Las Vegas.

"In keeping with the extremely 'insider-friendly' nature of the debtors' plan ... the plan provides for an extraordinarily broad release by the debtors and their estates of any claims and causes of action against the released parties," the lenders' objection said. "The released parties include insiders and several other non-debtor parties. The scope of the plan release includes not only the November 2007 going private transaction, which has been the focus of much attention in these cases, but any and all claims, causes of action, litigation claims, avoidance claims and other debts, obligations, rights, suits, damages, actions, remedies, judgments and liabilities whatsoever.

"Given the number of parties, including insiders of the debtors, being released and the sweeping scope of the release, disclosures regarding the plan release are particularly important in these cases. Nevertheless, the disclosure statement does nothing more than simply reiterate the plan release language, without further explanation," the filing said.

"The disclosure statement does not contain adequate information to permit creditors to make an informed decision about the plan," added attorneys for a second objector, Wilmington Trust Co., trustee for holders of $1.4 billion in Station bonds.

Wilmington specifically complained the statement lacks certain financial projections and asset valuations. Its attorneys said that while Station has asserted the bondholders will receive no recovery under the plan, that's premature since the plan hasn't been confirmed and the auction hasn't occurred.

Station attorneys haven't yet responded to the latest objections, but they plan to do so. All told, four attorneys for Station and 13 more for the creditors are so far involved in the bankruptcy case's disclosure statement issue alone.

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