Fertittas get majority ownership of Station Casinos

8 February 2012

LAS VEGAS, Nevada -- Station Casinos LLC minority owners Frank Fertitta III and Lorenzo Fertitta plan to buy out another shareholder for $73 million, giving the Fertitta family majority ownership of the gaming company founded by their father, Frank Fertitta Jr.

In a regulatory filing with the Securities and Exchange Commission on Monday, Station Casinos disclosed that FI Station Investor LLC, a company affiliated with the Fertittas, plans to purchase shares held by JPMorgan Chase Bank N.A.

"Frank and Lorenzo Fertitta's new investment into Station Casinos LLC demonstrates their continued commitment to the company as well as their belief in the Las Vegas locals market," company spokeswoman Lori Nelson said in a statement.

The company's capital structure is composed of four separate entities consolidated under Station Casinos.

The deal, if completed, could mean JPMorgan would lose its right to "designate a member of (Station's) board of managers."

JPMorgan appointed veteran gaming executive Stephen Greathouse to the board.

JPMorgan acquired its 15 percent ownership stake in Station Casinos last year under a deal in which its debt was converted to equity during the Station bankruptcy. JPMorgan declined to comment Tuesday.

As the company emerged from bankruptcy last year, the Fertittas owned 45 percent of Station Casinos, while Deutsche Bank AG owned 25 percent and JPMorgan and former bondholders each held 15 percent.

If the deal closes, the Fertittas could own 60 percent of Station Casinos.

Station Casinos, started as a single property called The Casino opened by the late Frank Fertitta Jr., celebrated its 35th anniversary July 1. Station Casinos filed for bankruptcy protection in July 2009 after the company had difficulty servicing more than $6 billion in debt.

Separately, Station Casinos disclosed Monday that its financial report for 2011 will show net revenue of about $1.178 billion compared with $1.14 billion in 2010.

Net revenues were expected to top $636.5 million in 2011, compared with $591.7 million last year, the privately-held gaming company said.

EBITDA was projected to be $284 million compared with $280.1 million last year, the company said. EBITDA, which is a key measure of profitability, is defined as earnings before interest taxes, depreciation and amortization.

As of Dec. 31, the company's outstanding debt was $2.5 billion.

Moody's Investors Service on Tuesday assigned a Caa2 rating to $625 million of Station's unsecured debt due in 2018. The gaming company has about $1.6 billion of unsecured debt.

In a report, Moody's said the rating on the new "unsecured notes reflects the large amount of senior ranking debt that reduces the recovery prospects for unsecured noteholders."

Moody's upgraded the company's senior secured ratings to B2 from B3. It also affirmed Station's B3 corporate rating and B3 probability of default rating.

"The stable rating outlook reflects our view that Station's EBITDA will begin to increase moderately due to the flow through of higher revenue to earnings, and that the company will apply free cash flow to permanently repay its debt," Moody's Vice President and Senior Credit Officer Peggy Holloway wrote in her report.

Holloway warned that the ratings could be lowered if monthly gaming revenues in the Las Vegas locals market begin to trend down or if Station's earnings fail to increase.

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