Station Casinos to seek bankruptcy protection by April 15

LAS VEGAS, Nevada -- Station Casinos Inc. revealed in court papers this week that it expects to file for bankruptcy protection on or before April 15, the date a debt forbearance agreement expires and five days after the deadline for bondholders to vote on Station's current debt-exchange offer.

Station had its attorneys file court papers Monday opposing a motion for a court injunction sought by a bondholder who is seeking to block the debt-exchange, a key part of Station's plan to file a pre-packaged bankruptcy petition that would keep its business operating and includes a cash infusion of $244 million by Station owners the Fertitta family and Colony Capital.

Boyd Gaming Corp., in the meantime, has been taking its case to buy all or part of Station directly to bondholders after it was rebuffed by Station.

With its revenue and cash flow hurt by the recession, Station has proposed the prepackaged Chapter 11 bankruptcy reorganization because of its inability to keep up with debt payments. In all, it's trying to restructure more than $5 billion of debt.

In U.S. District Court in Las Vegas, bondholder S. Blake Murchison is represented by class-action securities lawyers who are seeking an injunction to block the exchange offer in which Station would reduce its debt by exchanging $2.3 billion in bonds for cash and notes at exchange rates of 10 cents to 50 cents on the dollar, depending on the class of bond held. The deal is aimed at saving the company some $100 million per year in interest costs.

The bottom line, Murchison argues, is that the exchange offer will improperly subordinate existing bonds during a Station bankruptcy and that only certain classes of bondholders are allowed to vote on the deal.

Station, however, argues Murchison's case is without merit because all note holders will receive the same payment for their classes of bonds, regardless of whether they are allowed to vote on the exchange offer.

In court papers, Station called Murchsion a "gadfly' who is represented by securities lawyers in also suing Harrah's Entertainment Inc. over a Harrah's debt-exchange deal.

Station said the debt-exchange and reorganization plan should move forward for the good of the Las Vegas community, where Station is the dominant locals gaming company with properties such as Red Rock Resort, Green Valley Ranch Resort, two Fiestas and the Sunset, Boulder, Palace, Santa Fe, Texas and Aliante Station properties.

"To the extent that plaintiff believes there is something improper about the prepackaged bankruptcy plan that Station is pursuing, he may pursue his rights with all other creditors in the bankruptcy case (which Station expects to file on or before April 15),' Station said in court papers opposing the injunction.

"Plaintiff's motion is an attempt by a single bondholder (represented by a prominent class action law firm) to gain leverage by acting as the 'fly in the ointment' and seeking

to halt the efforts of Station to restructure its business in a manner designed to minimize the costs and business interruption that would be caused by a lengthy bankruptcy case,' Station argued, adding a prepackaged bankruptcy is a more efficient way for it to restructure its debt.

Station said it "will be irreparably harmed if the injunction is granted.'

"Station will, in effect, be stripped of the ability to pursue a prepackaged bankruptcy plan and will be forced to commence its Chapter 11 case immediately. Station will lose the ability to streamline the restructuring proceedings. And Station's creditors, employees and the local community will suffer immensely as a result,' Station said in its motion opposing the injunction.

"The public interest is particularly compelling here. In this economic environment, which has hit Las Vegas particularly hard, the public interest strongly favors an expeditious restructuring,' said Station's motion.

"Station employs over 13,000 people and plays an important social and economic role in the local community. There is no reason to needlessly jeopardize the economic health of this company and its various constituencies so that a single bondholder can pursue spurious claims outside of the established restructuring process.'

Station also filed a declaration by General Counsel Richard Haskins confirming the company plans to file for bankruptcy on or before April 15 and that the institutional holders of bonds that are voting on the Chapter 11 reorganization plan represent, among the note holders, a super-majority in interest and a majority in number.

Station is represented in the suit by attorneys Todd Bice and Debra Spinelli of the Las Vegas law firm Brownstein Hyatt Farber Schreck; and by Jerry Marks and Daniel Perry of the Los Angeles firm Milbank, Tweed, Hadley & McCloy.

Copyright © Las Vegas Sun. Inc. Republished with permission.