Fertitta's Station Casinos Experiencing Cut-backs

October 16, 2008

The Las Vegas Business Press has a nicely detailed report on the economic downturn’s effect on the core gaming business of UFC owners Lorenzo and Frank Fertitta. It is always interesting to keep an eye on the broader business environment and structures under which the various fight promotions operate. The article elaborates on Station Casinos taking steps to cut back costs, despite privately held firms like Station usually not being under the same pressure’s as publicly held companies. Financial analysts break down the crux of the problem:

“There has been such a pullback in offering capital to corporate America that it is very difficult for them to grow their business,” Wachovia Capital Markets bond analyst Dennis Farrell Jr. said. “So now, to grow cash flows and pay down debt, they have to do it through cost controls and eliminating new capital expenditures going forward.”

Station Casinos’ revenues fell 6.4 percent in the first six months of this year. The declining numbers make it hard to work down the companies’ debt, …… $5.3 billion for Station Casinos, following the buyouts.

The article also details the executive flight that has taken place since Station was taken private, detailing Lorenzo’s exit to the UFC:

Three long-time executives have departed Station Casinos since that buyout was announced in late 2006, including Chief Operating Officer Bill Warner and longtime Chief Financial Officer Glenn Christenson. That group also includes former president and equity shareholder Lorenzo Fertitta, who remains vice chairman. He left the casino business to concentrate on the privately-held Ultimate Fighting Championship, which he co-owns with his brother.

Station doesn’t look to be slowing up though, despite the economic downturn. Station Casinos will be opening the $675 million Aliante Station (in partnership with the Greenspun family, owners of the Las Vegas Sun) scheduled for Nov. 11. They have also spoken publicly about plans in July to break ground next year on Durango Station , while another multibillion-dollar project, tentatively called Viva, is in the early design stages. All three projects still need to secure financing, which will be challenging in the current credit market, according to the business press.

The report gave some insight into the ownership structure of Station since it went private. Colony Capital of Los Angeles owns 75% of Station but holds only 2 of 5 seats on the board. Australian-based Crown Ltd. holds a 4.9% stake in Station. The report doesn’t detail the portion held by the Fertitta family but it would comprise the biggest part of the remaining 20%.

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