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Parent Company of Station Casinos Files Chapter 11
.
Owners Colony Capital and the Fertitta Family Seek
 to Restructure $5.7 billion in Debt

By Arnold M. Knightly, Las Vegas Review-JournalMcClatchy-Tribune Regional News

July 28, 2009 - Station Casinos filed Chapter 11 in U.S. Bankruptcy Court in Reno today to restructure $5.7 billion in debt, most of which helped finance the company's buyout nearly 21 months ago.

The company said this morning that it has reached an agreement with its bank lenders to take the parent company and its noncasino subsidiaries, which include the company's landholdings in Reno and other nongaming assets, into bankruptcy, Chief Accounting Officer Thomas Friel said today. He stressed, however, the agreement will "not require us to file for the operating subsidiaries," which are the company's casino properties themselves.

"The operating subsidiaries, all 18 casinos, will continue to operate exactly like they do today," he said. "All the cash that gets generated from them will continue to be used on a normal basis."

Station Casinos owns and operates Red Rock Resort, Palace Station, Sunset Station, Boulder Station, Texas Station, Santa Fe Station, Wild Wild West, the two Fiesta properties, the Wildfire properties and vast land holdings in Clark County and Reno.

The company also has a 50 percent interest in Green Valley Ranch and Aliante Station, which are owned outside the company.

Chief Operating Officer Kevin Kelley said the bankruptcy will not affect employees or vendors getting paid or the company's reward point system.

"It is business as usual at our 18 operating properties," Kelley said. "Team members, guests and vendors are going to be treated just as they always have been for the last 33 years."

The filing covers the nearly $900 million in bank debt, $2.3 billion in bonds and $2.475 billion in a commercial mortgage-backed securities debt at the property level, Friel said.

Friel said an agreement has not been reached with any of the company's lenders about how the company will be restructured.

"The debt resides at the parent company, and we have an agreement with the lenders at the parent company that allows us not to put in the operating companies so the operating properties can operate normally through this process," he said.

The company also has an agreement, subject to court approval, to borrow up to $150 million in cash to assist the company through bankruptcy.

Herbst Gaming filed a similar Chapter 11 bankruptcy plan in March.

Today's bankruptcy filing is not the prepackaged bankruptcy plan the company announced in February. Station Casinos had proposed a prepackaged plan that would allow the gaming company to eliminate about half of its $5.7 billion debt load.

The prepackaged bankruptcy plan asked investors holding the $2.3 billion in unsecured bonds to swap high-cost debt for low-cost debt and cash. If investors had agreed, the company would have entered into a Chapter 11 bankruptcy.

In November 2007, Station Casinos was taken private in a $5.4 billion buyout by the Fertitta family, the company's founders, and real estate investment firm Colony Capital.

Colony Capital owns 75 percent of the company and the Fertittas hold the remaining 25 percent.

The company had entered into a series of forebearance agreements while it continued trying to negotiate a bankruptcy agreement with its debt Station Casinos, like other local gaming companies, has struggled to make payments on the heavy debt loads it racked up in the past several years because the recession has hurt visitor volume and spending in Las Vegas.

"We feel this process is the best process in order to emerge a much stronger company," Kelley said today. "Having less debt will allow us the ability to go out and pursue our long-term goals we have for the valley. We believe our business plan is sound. We believe in the long-term future of Las Vegas and its growth and we want to be a part of that for a very long time to come."

Contact reporter Arnold M. Knightly at aknightly@reviewjournal.com or 702-477-3893.

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Copyright (c) 2009, Las Vegas Review-Journal

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