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Station Casino's Reorganization Plan Proposes Fertitta Brothers
Would Acquire Stake in Four Casinos with Remaining 14 Properties to be Sold

By Howard Stutz, Las Vegas Review-JournalMcClatchy-Tribune Regional News

Mar. 25, 2010--The Fertitta brothers would acquire a minority stake in four casinos but the bulk of Station Casinos' 18 properties would be put up for court-supervised sale under a reorganization plan to be filed this morning with the U.S. Bankruptcy Court in Reno.

Under the proposed joint plan of reorganization, the ownership of Red Rock Resort, Palace Station, Boulder Station and Sunset Station would be taken over by a creditors group controlled primarily by investment bankers Deutsche Bank and JP Morgan. The four casinos have been given a value of $1.8 billion.

The newly formed company would sell 46 percent of the equity in the four casinos to Station Casinos founders Frank Fertitta III, the company's current chairman and chief executive officer, and Lorenzo Fertitta, the company's vice chairman.

The brothers will make an $85.6 million investment in the new company.

Los Angeles-based real estate firm Colony Capital, which currently owns 75 percent of Station Casinos, would acquire about 4 percent of the new company for a yet-to-be-disclosed amount.

The figures for the Colony investment is expected to be filed with the bankruptcy court by April 5.

Fertitta Gaming, a new entity owned by the Fertitta brothers, would operate the four casinos under a long-term management contract.

According to bankruptcy court documents, the four casinos constitute a large portion of Station Casinos' annual cash flow and a large percentage of the company's 13,000 employees.

The remaining 14 casinos, including Texas Station, the two Fiesta properties, Santa Fe Station, the Wildfire casinos, and 50 percent ownerships in Green Valley Ranch Resort and Aliante Station, would be sold under the supervision of the bankruptcy court.

According to the court filings, the plan calls for the assets to be sold in one piece.

Also, Fertitta Gaming would be allowed to make an offer for the casinos through the bankruptcy court sale process. The brothers are expected to "aggressively pursue" an acquisition of the casinos.

"Reaching a deal on the (four casinos) marks a significant step toward the restructuring of Station Casinos," Frank Fertitta III said. "I'm committed to the successful reorganization of the company that my family founded."

The plan, which requires approval of the bankruptcy court and Nevada gaming regulators, may not become finalized until the end of the year.

Until that time, Station Casinos would continue to operate the company throughout the proceedings.

"This restructuring will take some time and our guests and team members won't see any changes in the operation of our properties during this process," Station Casinos Executive Vice President Scott Nielson said.

Station Casinos reported approximately $5.6 billion in debt when it filed for Chapter 11 bankruptcy in July. About $2.5 billion of the secured debt covered the four casinos. About $900 million of secured debt is covered by the other 14 casinos.

Last year the company received an extension to file its plan of reorganization, which was due today.

The company announced at the end of February it had secured an agreement with a large majority of the creditors holding the company's secured debt on a comprehensive reorganization plan. The U.S. Bankruptcy Court is expected to give Station Casinos another 60-day exclusivity extension to continue discussions with creditors to finalize the plan.

Unsecured creditors may try and challenge the reorganization plan.

Last year, Boyd Gaming Corp. offered to pay $950 million for the 14 casinos the company plans to sell through the bankruptcy court. The offer was rejected and five months later Station Casinos filed for Chapter 11 bankruptcy.

Boyd Gaming tried to insert itself into the bankruptcy case in November by acquiring a portion of the company's unsecured debt. In December, Boyd Gaming offered to purchase all of Station Casinos for $2.45 billion.

Station Casinos has also been in a long protracted dispute with Culinary Workers Local 226, which has been seeking to organize the company's workforce.

"We recognize and respect our team members' right to be represented by a union if that's what they choose to do," Nielson said. "We're amazed that the union leadership has decided to use its members' dues in attempting to organize our team members instead of trying to find jobs for the thousands of culinary union members who have been laid off during this recession."

The company also filed Chapter 11 bankruptcy on GV Ranch Station, the management company that operates Green Valley Ranch Resort. Station Casinos is now in a legal feud with the Greenspun Corp., which owns 50 percent of the resort.

Station Casinos, which was founded by the Fertitta family, went private in November 2007 in a $5.4 billion private equity-financed deal. Frank and Lorenzo Fertitta invested $720 million into the company.

The Fertitta family members own 25 percent of Station Casinos while Colony Capital owns 75 percent of the company. However, the Fertittas have control of the board of directors.

Also, Station Casinos operates the Green Valley Ranch Resort, Aliante Station and several smaller properties in joint venture partnerships with the Greenspun Corp.

The company also manages an American Indian casino near Sacramento, Calif., and has agreements in place to manage proposed Indian casinos in California and Michigan.

Station Casinos also owns 204 acres in Reno for potential casino development.

It is unclear what will happen with the vacant land as the bankruptcy is resolved.

Contact reporter Howard Stutz at or 702-477-3871.


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