|By Steve Green, Las Vegas
SunMcClatchy-Tribune Regional News
Aug. 15, 2012--Station Casinos LLC of Las Vegas on Wednesday said it plans to pay off $150 million in debt, thanks to a financing deal for one of its Indian gaming partners.
Station, the largest operator of locals casinos in Las Vegas with 17 Southern Nevada properties, also has Indian casino management deals, including one with the Graton Tribe for a large casino resort it's developing 43 miles from San Francisco.
On Tuesday, even as local opposition continues to the casino, the tribe, with Station's help, finalized terms for $850 million in financing for the casino at a blended interest rate of 9.6 percent. The financing is set to close on Aug. 22, and plans call for the casino to open in late 2013.
Station said it's expected to receive $194 million from the financing as partial repayment for advances it has made to the tribe over the past nine years. Of that amount, $150 million is earmarked to reduce Station's $2.3 billion debt load. Since emerging from bankruptcy in the summer of 2011, the new Station has already paid off more than $130 million in debt.
These repayments are on top of the old Station slashing more than $4 billion in debt through the bankruptcy process.
Station will still be owed $56 million by the Graton Tribe and will earn casino management fees ranging from 24 percent to 27 percent of the casino's pretax income over seven years.
That management fee could be significant, given expectations by analysts at Standard & Poor's that the casino resort could generate annual net revenue of about $440 million after 2015.
"We congratulate the Graton Tribe on reaching this important milestone," Station Executive Vice President and Chief Financial Officer Marc Falcone said of the financing deal Wednesday. "We believe this is the largest new construction financing in the history of Native American gaming."
By paying off some of its debt, Station's interest costs will be reduced, and that should improve cash flow.
On Tuesday, the company posted a second-quarter profit of $7.5 million and said net revenue was up 4.5 percent from last year's second quarter to $312.2 million.
After factoring out accounting adjustments related to the bankruptcy, Station on Wednesday said the profit compares to a loss in the year-ago quarter of $11.4 million.
During a conference call with analysts on Wednesday, Station executives said that during the first and second quarters this year, the company's casinos hosted more visitors, and spending by those visitors was up.
Kevin Kelley, executive vice president and chief operating officer, said that with the economy improving and Station continuing with aggressive marketing initiatives and a solid business model, Station is doing well in competing in the locals market.
"Clearly it's a competitive market out there," he said. "It does appear that to a certain degree maybe some of the competitors have lost revenue at the expense of Station Casinos."
(c)2012 the Las Vegas Sun (Las Vegas, Nev.)
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