Station Casinos Becomes First Gaming Operator to Bankrupt

Station Casinos officials announced yesterday that they had prepared a restructuring plan which would constitute a prepackaged bankruptcy.

Many casino operators are struggling to avoid being swallowed whole by the debts they have incurred, as earnings have declined even as bond issues and bank loans come due. While several in the gambling industry have teetered on the edge of having to seek bankruptcy protection, Station Casinos appears to be poised to be the first victim of the recession.

Station Casinos officials announced yesterday that they had prepared a restructuring plan which would constitute a prepackaged bankruptcy. The concept involves having bondholders vote on the acceptability of the plan before Chapter 11 filing, allowing the process to be expedited. According to a report by the Las Vegas Sun, the idea has already received the support of Station's largest debtors.

Under the restructuring, Frank and Lorenzo Fertitta, sons of the founder of Stations, would put up $244 million in cash. In return, creditors would not exercise the right to accelerate debt payments, and the company could continue normal operations.

Station did not make a $14.6 million payment due February 2nd on notes due in 2014. The grace period to make good or face the whole $450 million loan being called falls on March 3rd, the day after lenders' votes on the restructuring is due.

Station Casinos has reportedly $350 million in cash on hand, enough to continue paying operating costs and interest payments, but it has been struggling with debts incurred in going private, a deal completed right before the recession decimated earnings.