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Arnold M. Knightly


$5.4 billion buyout: Station's hearing delayed

3 Oct 2007

By Arnold M. Knightly

NEVADA -- The hearing for the largest private-equity buyout of a Nevada gaming company to go before the state Gaming Control Board has been rescheduled for Thursday.

The board will hear testimony on the structure of the $5.4 billion management-led buyout of Station Casinos by Fertitta Colony Partners, a joint-venture partnership between members of the gaming company's founding family and California-based real estate investment firm Colony Capital.

The hearing was scheduled to be heard today during the 9 a.m. session but was moved at the request of Fertitta Colony Partners, said control board Chairman Dennis Neilander.

Neilander said the move was requested because the applicant was still working on documentation for its proposal.

When the item is heard, the three-member board will pass its recommendation for approval or disapproval to the Nevada Gaming Commission. The commission will have final approval for licensing at an Oct. 18 hearing.

Station Casinos Chairman and Chief Executive Officer Frank Fertitta III, director and President Lorenzo Fertitta, and Colony Capital Chairman and CEO Tom Barrack have been asked to appear at the hearing.

Bill Bible, former chairman of the state Gaming Control Board and current president of the Nevada Resort Association, said he doesn't see any concerns hindering approval since both applicants are already licensed in Nevada.

Colony Capital has a 60 percent ownership of the Las Vegas Hilton.

The hearing could be a preview of state regulators' mind-set as they prepare to enter hearings for the $17.1 billion buyout of Harrah's Entertainment by Texas Pacific Group and Apollo Management later this year.

However, Thursday's hearing will not be the first time private equity firms have appeared before Nevada gaming regulators. Private-equity firms have been licensed for deals involving Planet Hollywood Resorts, Las Vegas Hilton and Cannery Casino Resorts.

Similar licensing approvals are pending for Hard Rock Hotel, the Stratosphere and both Arizona Charlie's.

The hearing also comes while bond markets are tightening and debt becomes harder to float.

Fertitta Colony Partners has an agreement to secure $2.7 billion in debt financing through commercial mortgage-backed securities through a bond sale backed by JPMorgan Chase and Deutsche Bank.

Bill Eadington, director of the Institute for the Study of Gambling and Commercial Gaming at the University of Nevada, Reno, said the subprime mortgage crisis could spur the board to question the stability of the deal's financial arrangements.

Dan Primack, editor at large at Thomson Financial, said regulators looking at private equity deals in other industries have not been too concerned about debt being racked by the equity groups because it does not end up affecting a company's solvency.

"The deal can go through," he said. "It's the bank's responsibility to sell the bonds or they have to hold on to them."

Primack said that while selling the debt might be difficult for the banks, it should not present any roadblocks for approval.

The $90 per share buyout offer was approved by shareholders in August.

Even if approved in Nevada, the buyout is still pending approval from the National Indian Gaming Commission.

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