Station Casinos to File for Bankruptcy?
by MMASuPreMaCy on Dec 4, 2008 4:04 PM EST
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Reuters reports that holders of Station Casinos’ bonds have rejected a proposed debt restructuring:
Station Casinos Inc, which is fending off bankruptcy, said on Wednesday it has a received a letter from a lawyer representing its bondholders saying they view terms in a proposed debt exchange as inadequate.
The statement leaves the casino operator in a precarious position and could result in the company tripping terms in its bank loans, which could lead the company to file for bankruptcy protection, said Barbara Cappaert, analyst at KDP Investment Advisors.
The news comes on the heels of the company’s announcement earlier this week that it was suspending its 401(k) matching contribution. That move has the potential to inflame what is already a tense labor environment for the company thanks to its staunchly open shop policy.
This news comes after Station Casinos reported a Net Loss of 23.4 Million in the 3rd Quarter of their fiscal year.
Station Casinos, Inc. recently announced the results of its operations for the third quarter ended September 30, 2008. Here is a summary of the results for the company for the Quarter:
-For the third quarter, the Company reported a net loss of $23.4 million as compared to net income of $3.7 million in the prior year’s third quarter.
-Net revenues for the third quarter saw a decrease of 10% compared to the prior year’s third quarter.
-Adjusted EBITDA for the quarter had a decrease of 13% compared to the prior year’s third quarter.
-Green Valley Ranch, just outside of Vegas, generated Adjusted EBITDA before management fees of $19.7 million, a decrease of 22% compared to the same period in the prior year.
-The Major Las Vegas Operations reported a net loss of $5.7 million for the third quarter as compared to net income of $17.8 million in the same period in the prior year.
At this point they seem to be looking for a bottoming out of the market so that things my pick up again, but the economic free fall gives them no relief in sight. They are probably looking at at least two more quarters of diminished performance due to the economy, possibly more. The performance of Station isn’t as closely tied to the Zuffa/UFC as in the past, but it is of interest to those that follow the sport. The excellent performance of Station in the ’90s and over the first half of the decade provided the Fertitta brothers a cash flush situation that allowed the underwriting of a fight promotion that lost upwards of forty million dollars.
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Does the company need Lorenzo back?
"My job is a decision-making job, and as a result, I make a lot of decisions." --George W. Bush, The Decider, Lancaster, Pa., Oct. 3, 2007
Bankruptcy doesn’t mean they are going out of business, nor does this mean that they won’t get a restructuring deal in place. Heck restructuring their debt would probably be what the bankruptcy protection would be used for. Still it’s not good news for them.
bankruptcy does mean that their equity in station will be wiped out, though. they would probably buy a stake in the company coming out of reorganization, but it’s still very serious.
by boxingstudent on Dec 5, 2008 10:59 AM EST up reply actions
I don’t think it’s just Station either. All the casinos in Vegas are losing tons. Call me crazy, but I imagine that it has more to do with the utter collapse of the economy.
That is pretty much obvious, isn’t it?
Station Casino’s was rumored to be on a decline before the utter collapse of the econamy. You know, around the time that Fertitta guy went over to the UFC.
The economy has been collapsing since last year, they tried to cover it with that pittance of a economic stimulus check but this boat has been taking on water for a long time.
The real problem for Station is that next year looks like it will be even worse. It’s hard to dig out of a hole when the hole just keeps getting deeper. I’ve got a feeling we are going to be hearing the word bankruptcy a lot in the next 12 months.
Very true. I have heard rumors that the Fertittas may use some of their money to keep Station Casinos going through the hard times. I wonder if selling the UFC is an option they are considering.
I might of wondered about that before Lorenzo moved over to take over Zuffa now I doubt they would get rid of the successful company they completly own to support the struggling company they only own 24% of now. It is more likely that Colony Partners is who is thinking about the cash infusion or that both parties (and maybe an outside investor) would contribute to keeping it afloat. I wouldn’t think the Fertitta’s would have the $500,000,000 to make the cash infusion on their own to start with and it could take significant time to sell the UFC. Still they have said the UFC is always for sale if the price is right.
The loans on their new casino property... (500 million worth)
Is not accounted in Station’s main (5 billion+) debt. That money may have to be financed out of their own pocket. They may HAVE to sell the UFC
They will never HAVE to sell the UFC if they don’t want to, Zuffa and Station aren’t business connected and the Fertitta’s only own 24% of Station Casino’s now anyway. Heck the way things stand now their ownership of Zuffa might be more important to them than their quarter stake in Station Casinos. Besides they aren’t trying to buy out any loans (they couldn’t even if they sold the UFC) they are talking about interest payments and debt restructuring. That’s what the link I posted above talks about.
The only problem is if they see Station Casinos as a profitable venture when the economy starts coming back up, because you know that gambling will pick up again.
The UFC in terms of making money to the Fertittas is not a FOR SURE thing in terms of future security. True, they will NEVER have to, but they ALWAYS COULD as well. They have always mentioned that the UFC is always for sale for THE RIGHT PRICE.
by MMASuPreMaCy on Dec 5, 2008 12:56 PM EST up reply actions
First of all, I`m from Sweden, so I`m absolutely now Vegas or America gambling expert, but on the other hand, I like to offer my opinion on just abnout anything.
Are we sure that “gambling will pick up”? The last ten years gambling over the net has increased exponentially. Here in Sweden it`s massive. Ok, we don`t have the Casino-culture the way you have in the States, but it`s an option for the poor man gambler. Poker seems to be on the rise to, which, to my knowledge, is nowhere near as profitable for the casinos as craps or roulette. My guess is that Casinos are suffering from more than “just” the recession, they are being made the victims on a restructuring of people`s gambling habits.
"They called him the axe-murderer because he was murdering chumps. They should have been calling him the chump-murderer..." Rampage Jackson (commentating on the fighting abilities of Wanderlei "F#ck Chuck" Silva.)
by BlueberryMuffin on Dec 6, 2008 5:34 AM EST up reply actions
Vegas is gone from a gambling town to a resort town. If I just wanted to gamble there is a riverboat casino less than ten miles from where I live but going to Vegas is like going to adult Disneyland. Yea things like internet gambling have become an issue but what has really hurt Vegas is that people just aren’t travelling anymore.
Station’s business was based on locals and bargain hunters, their business should pick up if the economy stabilizes but they are carrying a significant debt load from taking the company private a couple of years ago.
http://feeds.feedburner.com/r/Payout/3/485795553/
NEW YORK, Dec. 15, 2008–Standard & Poor’s Ratings Services said today that its ‘CC’ corporate credit rating on Las Vegas-based Station Casinos Inc. remains on CreditWatch with negative implications, where it was placed Nov. 26, 2008. The ‘C’ rating on the company’s senior unsecured and subordinated debt issues also remains on CreditWatch with negative implications.
In addition, Standard & Poor’s lowered its issue-level rating on Station’s senior secured debt to ‘CCC’ from ‘B-’, and revised the CreditWatch implications on this rating to negative from developing.
These rating actions follow today’s announcement by the company that certain of the conditions in its previously announced private exchange offer will not be satisfied, and that it is terminating the exchange offer. The lowering of the secured debt rating and revision of the CreditWatch implications reflect the termination of the exchange offer. We previously indicated that our preliminary expectation, in the event the exchange succeeded, was for a corporate credit rating of ‘B-’. The current ‘CCC’ issue rating on the senior secured debt is now two notches higher than the ‘CC’ corporate credit rating, reflecting our notching criteria for a ‘1′ recovery rating.
"The continued CreditWatch listing reflects our concern that, absent completion of the exchange offer or an amendment to the terms of its senior secured credit facility, Station will violate its financial covenants in the current quarter," said Standard & Poor’s credit analyst Ben Bubeck. "As we have previously stated, we are skeptical that any amendment to the credit facility that does not include a significant equity infusion will allow Station to meet debt service requirements over the intermediate term, given its extremely weak credit measures, including consolidated EBITDA interest coverage of just 1.2x as of Sept. 30, 2008. We will continue to monitor management’s efforts to avoid breaching its financial covenants in the near term."
http://www.fightopinion.com/2008/12/16/from-bad-to-worse-for-station-casinos-financially/
Reuters reported yesterday that Station Casinos Inc is in a very precarious position right now with creditors. This paragraph is scary enough:
The failure of the debt exchange leaves the company in a precarious position, as analysts anticipate it may trip terms in its bank debt by the end of the year and will need to negotiate with bank lenders to avoid a default.
Chapter 11 is certainly not Chapter 7 in terms of bankruptcy proceedings, but this is certainly not a positive development. Neither is this story about Station Casinos temporarily halting matching 401(k) contributions to current employees.
How’s this news playing out internationally? The Sydney Morning Herald in Australia reports that Crown invested $242 million USD into Station Casinos and that the investment may now be ‘worthless.’ Standard & Poors has cut their rating on Station’s secured debt to ‘negative.’
by MMASuPreMaCy on Dec 16, 2008 2:08 PM EST up reply actions
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