Boyd sweetens bid for Station

17 December 2009

LAS VEGAS, Nevada -- Boyd Gaming Corp. sent another message Tuesday that it intends to be a serious player in Station Casinos' bankruptcy by offering $2.45 billion .

Boyd is offering $2.45 billion in cash and assumed debt for all 18 of Station's casinos, some land and other assets, a Tuesday filing with the Securities and Exchange Commission shows.

Barbara Cappaert, a bond analyst with KDP Investment Advisors, said in a note to investors that the bid could force Station Casinos' owners, the Fertitta family and real estate investment firm Colony Capital, to submit a strong restructuring plan or to sell the company.

Boyd's offer would be partially financed through the $2 billion remaining on Boyd's $4 billion credit facility, and a possible new debt issue, Cappaert said.

Boyd's filing said: "Boyd Gaming has significant availability and flexibility under its revolving credit facility to consummate the proposed transaction. Given our experienced management team and our successful history of operating in the Las Vegas locals market, our access to capital and our existing Nevada gaming licenses, we are well-positioned to consummate this transaction."

Station Casinos said it had received Boyd's offer and will review it "with its financial and legal advisers and relevant stakeholders."

Station Casinos spokeswoman Lori Nelson said in a statement that new proposal is similar to Boyd's earlier offer, which Station Casinos rejected.

In February, Boyd offered $950 million for a majority of Station Casinos' operating assets, but the locals gaming company's board rejected the offer a week later.

Station Casinos, which is in Chapter 11 bankruptcy, last week was given until March 25 to submit its own reorganization plan to the bankruptcy court in Reno.

Nelson said Station Casinos' restructuring plans don't envision a sale of any assets.

"To date, the board has made no determination to pursue, nor has the company taken any steps toward pursuing, a sale of all or any portion of the company's assets," Nelson said in a statement.

Boyd Chief Executive Officer and President Keith Smith said in August that his company could play a "key role" in helping Station Casinos emerge from bankruptcy quickly.

Boyd officials declined Tuesday to comment beyond the filing.

Boyd, which owns nearly $2 million of Station Casinos debt, has been trying to insert itself into the bankruptcy proceeding.

The bankruptcy judge rejected Boyd's request to join a group of independent lenders seeking an examiner to review the Station Casinos' multibillion-dollar buyout and its rejection of Boyd's first offer.

The judge said Boyd would be better served by talking directly with Station Casinos.

Boyd's new offer includes assets held under a financing structure called OpCo, which has $3.2 billion in debt, and PropCo, which holds $2.475 billion in debt.

OpCo's assets include the Wild Wild West, Santa Fe Station, the Fiesta and Wildfire properties, Texas Station, vacant land in Clark County and near Reno, American Indian management contracts and joint ventures including Aliante Station and Green Valley Ranch Resort.

PropCo's assets include Red Rock Resort, Palace Station, Sunset Station and Boulder Station.

Land secured by a $250 million loan, which includes part of the 106 acres around Wild Wild West, and 61 acres on the southern end of Las Vegas Boulevard at Cactus Lane, is not included in the offer. Neither are any outstanding litigation claims.

Boyd owns four casinos in the locals markets, including Sam's Town and The Orleans, and three downtown casinos. The company also owns six casinos in the Midwest and a 50 percent interest in the Borgata in Atlantic City.

Joel Simkins, a Macquarie Equities Research gaming analyst, said in a note to investors that he remains cautious about the proposed acquisition because of the stressed locals market.

Homebuilding and Strip-casino development are expected to be nearly nonexistent over the next few years, and therefore should create few new jobs, Simkins said.

"It is also hard to ignore the facts related to the wealth destruction caused by the housing meltdown as well, which is likely to hamper spending by Las Vegas locals gamblers, particularly when a significant chunk of these players are retirees and dependent upon either savings, retirement funds, or a fixed income," Simkins said.

Simkins continued: "While we recognize (Boyd's) ability to create synergies in the combined locals business, we find generating an attractive return on the deal difficult in the current depressed environment."


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