Boyd files objections to Station reorganization plans

22 April 2010

LAS VEGAS, Nevada -- Boyd Gaming Corp., which has been seeking to purchase all or a portion of Station Casinos for the past year, filed objections to its rival's bankruptcy reorganization plans Thursday, saying the proposed concept would diminish the value of certain properties, thus eliminating offers from potential bidders.

Boyd is a creditor in the Station Casinos Chapter 11 bankruptcy proceedings through the purchase of some of the casino operator's debt.

The company, which operates the Coast Casinos brand, said two plans submitted in the past month by Station Casinos allows members of the Fertitta family and their lenders to "cherry-pick" certain assets while "destroying any opportunity for fair bidding or plan process ... and significantly hampering the ability to attract a fair price ... from non-insider competitors" for about 13 casinos and Indian gaming contracts.

In its motions, Boyd asked the U.S. Bankruptcy Court in Reno not to rush any approval of the two reorganization plans so that creditors who object to reorganization proposals can investigate other alternatives.

Under one plan, Station Casinos would spin-off five of its largest resorts, including Red Rock Resort and Sunset Station, into a separate holding company owned by its lenders, Los Angeles real estate company Colony Capital and members of the Fertitta family through the newly formed Fertitta Gaming.

The rest of Station Casinos, including Texas Station, Santa Fe Station and the Fiesta properties, would be sold through a bankruptcy court auction. On Monday, the Fertittas said they would pursue a $772 million stalking-horse bid through Fertitta Gaming for those assets.

Boyd Gaming's stance is similar to that of the official committee of Station Casinos' unsecured creditors, who also asked the court to slow the process, calling the company's proposals "the latest component of an overall scheme to ensure that the Fertittas retain control of the Station enterprise, at as low a valuation as they can get away with."

In its filing, Boyd Gaming said an initial reorganization plan by Station Casinos to spin off five of its largest casinos into a new holding company would strip the rest of the assets of their customer databases, players club membership rolls and other operating tools, thus reducing their value in the eyes of potential bidders.

"The modern casino business is a technology-driven enterprise operation that is heavily dependent on sophisticated (and often proprietary) information technology and intellectual property for successful operation," Boyd Gaming said in one motion.

Without the databases and customer lists, a buyer of any Station Casinos property sold through the auction "would be purchasing a lifeless shell."

Station Casinos spokeswoman Lori Nelson said the company would respond to Boyd Gaming's assertions through its own court filings.

"Many of the objections are simply wrong and we will so demonstrate in our responsive papers," Nelson said.

Boyd Gaming has made two public offers for Station Casinos. In February, the company offered $950 million for 14 casinos. In December, the bid was upped to $2.45 billion for the entire company. Both offers were rejected.

Earlier this week, Boyd Gaming spokesman Rob Meyne said the company was concerned because there was little detail about Station Casinos' efforts to reorganize its debt. Boyd Gaming, however, "remains interested" in acquiring all or part of Station Casinos, it said.

Under the Station Casinos reorganization plans, the five resorts -- Red Rock Resort, Sunset Station, Boulder Station, Palace Station and Wild Wild West -- would become its own company that lenders Deutsche Bank and JP Morgan would own and sell a 46 percent stake to Fertitta Gaming for $85.6 million.

Fertitta Gaming would operate the casinos under long-term management contracts that would pay the company 2 percent of the properties' revenues and 5 percent of their cash flow.

The stalking horse bid would be in partnership with Colony Capital and the banks. The deal calls for $317 million in cash and $455 million in new credit, but it doesn't elaborate on how much money each party would commit.

Related Links
Boyd Gaming Corporation Gaming Vendor Information
Nevada Gambling


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