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Arnold M. Knightly

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Boyd continuing Station Casinos push

10 Mar 2009

By Arnold M. Knightly

LAS VEGAS, Nevada -- Whether Boyd Gaming Corp. can complete its purchase of many of Station Casinos' assets rests in the hands of Station's bondholders, a local finance professor following the story said.

"This is a kind of a game we are in," said Michael Sullivan, a finance professor at the University of Nevada, Las Vegas. "You've got the bondholders sitting back and letting the players battle it out so they can get a little bit of a better deal. I suspect we won't know until the eleventh hour exactly what's going to happen."

Boyd Gaming said Monday it will continue to pursue the purchase of a majority of its competitor's assets, although Station Casinos issued a letter last week rejecting the $950 million offer.

In a filing with the Securities and Exchange Commission, Boyd said it "remains committed to pursuing a transaction to acquire some or all of the assets of Station, and is prepared to work with Station in a timely fashion to prepare a formal proposal."

Station Casinos "has not engaged Boyd Gaming in any discussion regarding the company's proposal, nor has it provided any information that would enable Boyd Gaming to consider submitting a binding proposal," the filing said.

Sullivan said the two sides' positions mean the companies may be forced to talk to the bondholders who control $2.3 billion of Station Casinos' debt.

Nancy Rapoport, a bankruptcy law professor at the University of Nevada, Las Vegas, said the bondholders need to determine whether Station's prepackaged bankruptcy proposal or a forced bankruptcy is best for them.

"Boyd's tempting the heck out of the bondholders," Rapoport said. "If the prepack talks break down, and they can't get the bondholders to agree, that still doesn't mean Station can't file a garden variety Chapter 11. Boyd could always buy it out of the bankruptcy."

Sullivan said Boyd's buyout bid offers bondholders another alternative.

"(Bondholders) don't have to do a forced bankruptcy and end up in a messy situation where you become the equity holders," Sullivan said of Boyd's buyout offer. "(Boyd is saying,) 'You don't have to do what the Fertittas want and accept this restructuring. We'll give you an alternative. So what you now have is an alternative bidder in there.' "

In a March 3 letter rejecting Boyd's offer, Station Casinos' board of directors said the company will not take "any steps toward pursuing a sale of all or any portion of the company's assets." The letter cited the "highly conditional nature" of Boyd's offer, and the risks "in sharing sensitive and confidential information with a significant competitor" and potential harm to "stakeholders" as reasons for rejecting the offer.

Boyd stated Monday it understood Station's concern about sharing "sensitive information" with its closest competitor. The company, however, said it would work with Station Casinos to minimize those risks.

The filing challenges Station Casinos' assertion that a deal might not be completed because of "Boyd's potential inability to perform due to its own financial position."

Boyd Gaming responded by stating: "(Boyd Gaming) has sufficient liquidity under its credit facility to finance a cash transaction, and contemplates that no amendment to its credit facility would be required under the proposed transaction structure."

The company has a $2 billion line of credit that would be used to fund the purchase.

Station Casinos' prepackaged bankruptcy plan would give bondholders between 10 cents and 50 cents on the dollar in new notes and cash.

Under the plan, the company would enter a voluntary Chapter 11 bankruptcy and the gaming company's owners -- the Fertitta family and real estate investment firm Colony Capital -- would put $244 million in cash into the company.

Boyd issued its surprise bid a week before a deadline for bondholders to vote on Station's restructuring plan.

Boyd's offer probably played a role in Station Casinos reaching agreements with its debtholders to extend the vote deadline to April 10.

Sullivan said Boyd and Station may start discussions on an asset sale before the new deadline, "but I'm not sure we'll know about it."

Boyd Gaming shares climbed Monday to $3.47 per share from $3.10 per share in early morning trading, before closing at $3.08 on the New York Stock Exchange, down 2 cents, or 0.65 percent. Boyd Gaming shares were trading at $26.25 a year ago.

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