Bloomberg News: Station Casinos Near Default

January 30, 2009

As Zuffa has seen a uptick in business as the economy worsens, the performance of the Fertitta family business, Station Casinos, has be heading in a diametrically opposite direction. Bloomberg News today reports that the company may be teetering on the edge of bankruptcy:

Station Casinos Inc., whose Las Vegas-area properties include Red Rock Casino and the two-month old Aliante Station, may be on the brink of default, making its private-equity owners a casualty of the largest recorded decline in gambling revenue.

“From a liquidity perspective, they are on the brink of bankruptcy,” New York-based Holloway said in an interview. “It depends on their ability to negotiate with lenders and willingness to amend the debt.”

Station has a bond payment due Feb. 1, according to Chris Snow, an analyst at CreditSights Inc. in New York. The payment is for $450 million of 6.5 percent notes due in 2014, Snow said. The securities now trade at 2.5 cents on the dollar, down from 70 cents in February 2008…

Zarnett recommended investors avoid Station Casino’s debt due to “deteriorating fundamentals, upside down balance sheets, lack of liquidity, high leverage and potential breach of covenants.”

Time and a “once in a century” economic downturn have contributed to present a scenario that would have been unfathomable of 5 years ago: a Fertitta portfolio where the UFC is business that is the cash cow, throwing off huge prfits and Station Casinos is debt riddled entity that is on shaky financial legs. The roles were reversed not that long ago in a Pre-TUF environment that saw the UFC continue on only because of the largess that a booming Station Casinos provided. One may wonder at what point a suite in the Zuffa offices is made ready for Frank III.

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