Station Casinos continues to negotiate with creditors in an attempt to restructure the massive debt load (nearly $6 billion) from taking the company private. These discussions have been ongoing since early February; the bondholders and lenders have granted Station several forbearance agreements (meaning they promised not to launch legal action against the company in response to Station defaulting on 2009 interest payments) while the parties try to come to terms.
The previous forbearance agreement expired on May 29, but the bondholders and lenders agreed to continue discussions and, according to a Station spokesperson, they "made progress since then." Meanwhile, Station formally requested another forbearance extension, this one to expire on July 17, to which the lenders also agreed.
So the saga continues and it’s anyone’s guess if the noteholders will agree to the proposed restructuring of the company, which would buy back the defaulted debt for cash and new bonds for $850 million, plus another $1.45 billion in subordinated notes, both for pennies on the dollar. It would also leave the owners, the founding Fertitta family and private-equity firm Colony Capital, in control of the company.
As far as what Mr. Curtis thinks of Station’s post-bankruptcy prospects, he’s reluctant to speculate. He says he, like everyone else, is closely watching these developments, along with many others. But whatever happens, he hopes there won’t be major changes, especially at Red Rock, one of his favorite hangs. But he does say, definitively, that you can call him Anthony.
We can tell you that the murmurings around town point to the possibility that the lenders might have granted Station its last extension. During five months of negotiations over the original Station proposal, the Fertittas and Colony Capital have asked the debt holders to bear the brunt of the company’s collapse under its mountain of debt and the offer doesn't seem to have changed much. Thus, the creditors might be getting impatient, especially since the economic outlook for Las Vegas remains gloomy indeed.
We just reported in the July LVA that Nevada’s unemployment rate broke a 27-year-old record in May, reaching 11.3%, with Las Vegas at 11.1%. Since May of last year, Nevada has lost 81,500 jobs, a 6.3% contraction, with nearly 60,000 of the lost jobs in Las Vegas. Nearly 155,000 Nevadans were unemployed and seeking work in May, 112,700 in Las Vegas.
In addition, an astounding 80% of Las Vegas homes bought between 2005 and 2007 are under water. And of all Las Vegas homeowners, 67% owe more on their homes than the houses are worth, the worst percentage in the country.
Certainly, Station and its creditors are hoping for a turn-around in the financial fate of the company (which lost $34 million in the first quarter of ‘09), but as its casinos cater mostly to locals who are hurting, and the value of its hundreds of acres of land around the valley has plummeted precipitously, and the debt load from the buyout is crushing, many observers would be surprised if Station Casinos can avoid bankruptcy.
After that, who knows? Plenty of casinos have not only survived, but thrived, after emerging from Chapter 11 restructuring. On the other hand, plenty of casinos have gone belly-up and were never heard from again. Station, however, has a strong product and we’d expect it to be a survivor, whoever winds up owning it.
