Applying yet another tongue bath to the management and bankers who drove Station Casinos into a brick wall at top speed, bankruptcy Judge Gregg Zive has decreed Fertitta Gaming‘s $772 million* stalking-horse bid “an adequate floor” for the auction of 11 Station properties, a tribal casino-management contract plus unspecified real estate. (As best I can make out, nobody except Station knows what undeveloped land will go into the auction and what lurks nearby in a “LandCo.”) Zive also rolled over for a sugar-pill provision that takes the massive land assemblage surrounding Wild Wild West off the auction block and into the lap of the Station/Deutsche Bank coalition that’s calling the shots in the reorganization.
(* — I’m un-correcting a correction because it turns out my memory is accurate but the R-J‘s reportage was not.)
Never mind that he gave his blessing to a bid that was, in effect, negotiated between Station CEO Frank J. Fertitta III and Fertitta Gaming Managing Member Frank J. Fertitta III; Zive feared that letting someone else put in the opening bid would have a destabilizing effect on the company and the local economy. (With Station’s financial bow planes locked in “dive,” stability is not the foremost quality one ascribes to the company at the moment.)
At this rate, the Aug. 6 auction will be a mere formality, and Fertitta Gaming and its sugar daddy, Colony Capital, will (re)acquire roughly two-thirds of the assets of a company that once brought $5.4 billion — plus preexisting debt, for the equivalent of chump change. In the process Station will go from having been taken private at a preposterously high cash-flow multiple to been done so (again) at a ludicrously low one. The Fertitta family couldn’t have gotten a luckier set of breaks if they had scripted this entire scenario themselves.
While Zive has made some rulings of dubious wisdom in the Station case, this wasn’t one of them. There are lots of people who have beefs with Station. However, the ongoing grudge match between the Fertittas and the Culinary Union isn’t germane to the bankruptcy and Zive was right to show the Culinary the door. Sometimes the union just doesn’t know when to butt out. Besides, even if the management-led reorganization plan were to fall completely to pieces, thanks to a reconciliation with the Greenspuns, the Fertittas will still be safely at the helm of Green Valley Ranch and Aliante Station. As such, they and the Culinary can look forward to whacking each other around for years to come.
Why are the unsecured bondholders not being given first option to buy the equity judge Zive?
Thanks for explaining this complicated mess Mr. McKee. Station Casinos is lucky to have a judge who is on their side in this debacle. I guess Station Casinos “is to big to fail” like other Wall Street investment banks who lost billions of dollars. I think the casinos on the Strip will start doing better eventually before local casinos do so I’m not sure who is going to bid on this. Boyd Gaming, in my opinion, is the only company that might bid on this but then I guess they would co-own some of these properties with Station Casinos. Since these two companies control the majority of the local casinos market I don’t think they get along to well. I remember Jeff Simpson said a while ago on Vegas Gang that the top executives at both of these companies do not like each other at all. What a disaster.
Since the Station/Greenspun joint venture isn’t in Chapter 11 (yet), Boyd won’t be able to bid on it and its Fertitta nemeses will — at minimum — have at least Green Valley Ranch and Aliante Station from which to rebuild their empire.
I have to wonder if Station wouldn’t be doing better had it moved forward on its much-delayed Reno project(s) instead of Aliante, a $662 million mistake. But putting all its eggs in the Vegas basket — tribal management deals excepted — Station was the company positioned worst of any to ride out the Great Recession.